Kraft Foods Inc. is the second-largest food company in the world. Assume the company recently reported the following amounts in its unadjusted trial balance (in millions) as of December 31, 2017: 

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 million of its Accounts Receivable will be uncollectable. Prepare the adjusting journal entry required at December 31, 2017, for recording Bad Debt Expense. 

3. Repeat requirement 3, this time assuming the unadjusted balance in Kraft’s Allowance for Doubtful Accounts at December 31, 2017, was a debit balance of $20 million. 

4. If one of Kraft’s main customers declared bankruptcy in 2018, what journal entry would be used to write off its $15 million balance?

Transcribed Image Text:

Debits Credits Accounts Receivable $4,833 Allowance for Doubtful Accounts $ 129 Sales (assume all on credit) 42,201