Question
At December 31 of the current year, which is the fiscal year-end of Penguins Incorporated, the following balances appeared in the general ledger, prior to
At December 31 of the current year, which is the fiscal year-end of Penguins Incorporated, the following balances appeared in the general ledger, prior to adjusting entries:
Accounts Receivable$ 110,000DR
Allowance for doubtful accounts 2,000CR
Sales Revenue (1/2 of this total = credit sales) 400,400CR
Sales Returns & Allowances (1/2 of this total relates to credit sales)10,400DR
Included in the Accounts Receivable are accounts to be written off in the amount of $2
(a)Prepare all of the necessary year-end adjusting entries under the assumption that it is estimated that two percent of outstanding customer receivables will not be collected.
(b)If bad debts are estimated to three-quarters of two percent (.015) of NET credit sales, indicate how your answer to part (1) would change - just prepare the journal entry that would change!
Show how "Receivables" will be disclosed on the balance sheet as at December 31 for both parts (a) and (b).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started