Question

Bad debt expense LO3
CHECK FIGURES: 1. Bad Debt Expense = $8,720; 2. Bad Debt Expense = $6,480

The following is information taken from the June 30, 2020, balance sheet of Tippleton Company:

Part 1

During July, Tippleton Company recorded total sales of $904,000, all on credit. There were $32,000 of sales returns and allowances. Collections during July were $982,000. Total receivables identified as being uncollect- ible and written off during July were $17,000. Tippleton estimates bad debts as 1% of net credit sales.

Required Prepare the adjusting entry to record estimated bad debts for July.

Part 2

During August, total sales of $957,000 were recorded, all on credit. Sales returns and allowances totalled $16,000. Collections during the month were $812,000, which included the recovery of $2,000 from a customer account written off in a previous month. No accounts were written off during August. Tippleton Company changed its method of estimating bad debts to the balance sheet approach because the new accountant said it more accurately reflected uncollectible accounts. The resulting aging analysis determined total estimated un- collectible accounts at August 31 to be $15,000.

Required Prepare the August 31 adjusting entry to record estimated bad debts for August.

Problem 8-9A Estimating bad debts LO3

CHECK FIGURE: a. Total estimated uncollectible accounts = $13,638
The following information is available regarding the outstanding accounts receivable of Mufu Contracting at

September 30, 2020:

CHAPTER 8 Receivables

Accounts receivable....................................................................................... $340,000
Less: Allowance for doubtful accounts ..........................................

Answer 1

1.

Account Titles	Debit	Credit
Bad Debt Expense	$            8,720
Allowance for Doubtful Accounts		$         8,720

Bad Debt Expense = (904000-32000)*1% = $8720

2.
Allowance for Doubtful Accounts balance as on Aug 31 = 14800 - 17000 + 8720 + 2000 = $8520

Account Titles	Debit	Credit
Bad Debt Expense	$            6,480
Allowance for Doubtful Accounts		$         6,480

Bad Debt Expense = $15000 - 8520 = $6480

Sine Balance of Allowance for Doubtful accounts as at end of June is not given, i have taken it as $14800

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