Estimating and Recording Bad Debt Estimates and Write-offs; Reporting of Accounts Receivable

Sun Systems Inc. had the following information:

1. Sales revenue for 2020, $180,000, of which one-sixth was on account. 2. Allowance for doubtful accounts, balance December 31, 2019, $900 credit. 3. On December 30, 2020, the company determines that a specific customer's account is uncollectible and writes off the account of $1,050. 4. Accounts receivable, balance December 31, 2020 (after write-offs during the year), $17,000. 5. Aging schedule at December 31, 2020, showing the following breakdown of total accounts receivable.

Status	Amount
Not past due	$10,000
Past due 160 days	$4,000
Past due over 60 days	3,000

Required

a. Prepare the December 30, 2020 entry to write off the uncollectible accounts.

b. Prepare the 2020 adjusting entry to record bad debt expense for each of the following separate assumptions concerning expected bad debt loss rates. Note: Treat each of the following scenarios separately, they are independent of one another.

i. Bad debt expense is based on credit sales, 1.5%.

ii. The Allowance for Doubtful accounts is based on total receivables at year-end, 2.5%.

iii. The Allowance for Doubtful accounts is based on aging schedule: not past due, 0.5%; past due 160 days, 1%; and past due over 60 days, 8%.

a.

Date	Account Name	Dr.	Cr.
Dec. 30, 2020	AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableInventoryInventoryEstimated ReturnsRefund LiabilitySales RevenueSales ReturnsSales DiscountSales Discount ForfeitedCost of Goods SoldBad Debt ExpenseN/A	Answer	Answer
	AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableInventoryInventoryEstimated ReturnsRefund LiabilitySales RevenueSales ReturnsSales DiscountSales Discount ForfeitedCost of Goods SoldBad Debt ExpenseN/A	Answer	Answer

b. Note: Treat each scenario separately, they are independent of one another.

i.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020	AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableInventoryInventoryEstimated ReturnsRefund LiabilitySales RevenueSales ReturnsSales DiscountSales Discount ForfeitedCost of Goods SoldBad Debt ExpenseN/A	Answer	Answer
	AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableInventoryInventoryEstimated ReturnsRefund LiabilitySales RevenueSales ReturnsSales DiscountSales Discount ForfeitedCost of Goods SoldBad Debt ExpenseN/A	Answer	Answer

ii.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020	AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableInventoryInventoryEstimated ReturnsRefund LiabilitySales RevenueSales ReturnsSales DiscountSales Discount ForfeitedCost of Goods SoldBad Debt ExpenseN/A	Answer	Answer
	AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableInventoryInventoryEstimated ReturnsRefund LiabilitySales RevenueSales ReturnsSales DiscountSales Discount ForfeitedCost of Goods SoldBad Debt ExpenseN/A	Answer	Answer

iii.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020	AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableInventoryInventoryEstimated ReturnsRefund LiabilitySales RevenueSales ReturnsSales DiscountSales Discount ForfeitedCost of Goods SoldBad Debt ExpenseN/A	Answer	Answer
	AnswerCashAccounts ReceivableAllowance for Doubtful AccountsInterest ReceivableInventoryInventoryEstimated ReturnsRefund LiabilitySales RevenueSales ReturnsSales DiscountSales Discount ForfeitedCost of Goods SoldBad Debt ExpenseN/A	Answer	Answer