Kraft Foods Inc. is the second-largest food and beverage company in the world. Assume the company recently reported the following amounts in its unadjusted trial balance as of December 31, 2010 (all amounts in millions):
Debits Credits
Accounts Receivable.............................. $6,785
Allowance for Doubtful Accounts................................ $ 121
Sales (assume all on credit)....................................... 49,207
Required:
1. Assume Kraft uses ½ of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.
2. Assume instead that Kraft uses the aging of accounts receivable method and estimates that $233 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at December 31, 2010, for recording Bad Debt Expense.
3. Repeat requirement 3, except this time assume the unadjusted balance in Kraft's Allowance for Doubtful Accounts at December 31, 2010, was a debit balance of $20.
4. If one of Kraft's main customers declared bankruptcy in 2011, what journal entry would be used to write off its $15 balance?