Question

Q2-

Assume that you have a company. And the management estimates that 1% of sales will be uncollectible.

Give any amount of sales and prepare the journal entry using the percent of sales method.

Q3- Abdulaziz company purchased a machine in 2013 for 50,000 that has a useful life of 5 years with a salvage value of 5,000

Calculate the depreciation expense, accumulated depreciation, book value throughout its useful life using:

1- Straight-line method.

2- Units of Production method if the machine produces 100,000 units.

Here is a table of units produced each year:

First	Second	Third	Fourth	Fifth
23,000	25,000	-	30,000	22,000

3- Double Declining balance method.

Answer 1

Solution:

Question 2 --

Allowance for Doubtful Account Method

Under Allowance for Doubtful Debt method, the company uses an estimate for allowance for doubtful debt by using specified method and accordingly book Bad Debt Expenses for the period.

Allowance method creates bad debts expenses before the company knows specifically which customers will not pay on the basis of prior history and prior experience.

On the basis of prior years’ experience company can reasonably estimated what percentage of credit sales measure will not be collected.

Estimated Uncollected Accounts Expense is adjusted with the balance in the account of Allowance for Doubtful Account.

Estimated Uncollectible Amount for Year = Credit Sales Amount x Estimated Uncollectible 1%

Let Credit Sales for the Year = $1,000,000

Estimated Uncollectible Amount for Year = Credit Sales Amount $1,000,000 x Estimated Uncollectible 1%

= $10,000

Journal Entry

Date	General Journal	Debit	Credit
Year End	Bad Debt Expense	$10,000
	Allowance for Uncollectible Account		$10,000
	(Being bad debt expense for the year recorded)

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