A- The Adjusting Entry

The accountant for Flowers-R-Us gathers the following data before making adjusting entries:

Accounts Receivable balance	$32,500
Allowance for Doubtful Accounts balance	$150
Net credit sales	$750,000

You collect data from prior years and find that uncollectible accounts average 1.5% of net credit sales each year. Estimate the amount of the bad debt expense for the current year.

Net Credit Sales	x	Percentage Expected to Default	=	Estimated Bad Debt Expense
$	x	%	=	$

Complete the information for the adjusting journal entry:

Debit: Bad Debt Expense	$
Credit: Allowance for Doubtful Accounts	$

What is the net realizable value of Accounts Receivable

Before the adjusting entry?

$

After the adjusting entry?

$

Assume that you are a staff accountant at Raymond Co. One of your responsibilities is the adjusting entry to record the bad debt expense at the end of the accounting period. Raymond uses the income statement approach to make the estimate. You collect net credit sales figures and the data regarding customer balances that have been written off for prior periods. You determine that uncollectible accounts average 2.5% of net credit sales. The accounts receivable clerk has informed you that net credit sales for the year were $2,250,000 and the December 31, balances in Accounts Receivable and Allowance for Doubtful Accounts are $180,000 and $255, respectively.

Use the T accounts to prepare the adjusting entry required at the end of the year to record the expense for bad debt. If required, round your answers to the nearest dollar. If amount is zero, leave the box blank.

SelectAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCorrect 1 of Item 4
Bal	0
Bal

SelectAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCorrect 6 of Item 4
			255	Bal
				Bal

Use the selection dropdowns to indicate the effect of the transaction recorded in each T account has on the accounting equation and on which financial statement the account is reported.

C- APPLY THE CONCEPTS: Prepare the entry for the write-off of a customer account

On January 4, , Raymond Co. received notice that one of its customers, Danbury Inc., had filed for bankruptcy. After several failed attempts to collect the balance due from Danbury, Raymond makes the decision to write off Danburys balance of $3,600. Use the following T accounts to prepare the entry to write off Danburys balance. The balance in Allowance for Doubtful Accounts and Accounts Receivable has not changed since the adjusting entry was made (refer to the preceding section). If required, round your answers to the nearest dollar. If amount is zero, leave the box blank. Following the T accounts, use the selection dropdowns to indicate the effect on the accounting equation and the buttons to indicate on which financial statement the account is reported.

SelectAllowance for Doubtful AccountsBad Debt ExpenseCashCorrect 1 of Item 5
				Bal
				Bal

SelectAccounts ReceivableBad Debt ExpenseCashCorrect 7 of Item 5
Bal
Bal

What is the net realizable value of Accounts Receivable after the write-off entry has been prepared? $

What is the net realizable value of Accounts Receivable after the adjusting entry has been prepared? $

D- APPLY THE CONCEPTS: Prepare the entries for the recovery of a customer account

On January 12, Raymond received notice from Danbury Inc. that they are able to pay $2,880 of the amount owed in , if Raymond is willing to accept that amount as payment for the entire amount owed. Raymond agrees. The following day, $2,880 was electronically transferred to Raymonds bank account. Use the T accounts to prepare the entries for the recovery. Recall that there are two separate entries: (1) the reversal and (2) the collection of cash. If required, round your answers to the nearest dollar. If amount is zero, leave the box blank.

Following the T accounts, use the selection dropdowns to indicate the effect on the accounting equation and the buttons to indicate on which financial statement the account is reported.

Cash
Bal	135,300
(1)
(2)
Bal

Accounts Receivable
Bal
(1)
(2)
Bal

Allowance for Doubtful Accounts
				Bal
(1)
(2)
				Bal

What is the net realizable value of Accounts Receivable after the recovery entries have been prepared? $