P9-3A Journalize entries to record transactions related to bad debts

Presented below is an aging schedule for Halleran Company.

Number of Days Past Due

Customer

Total

Not yet Due

1-30

31-60

61-90

Over 90

Anders

$ 22,000

$ 10,000

$ 12,000

Blake

40,000

$ 40,000

Coulson

57,000

16,000

6,000

35,000

Deleon

34,000

34,000

Others

132,000

96,000

16,000

14,000

6,000

$ 285,000

$ 152,000

$ 32,000

$ 26,000

$ 35,000

$ 40,000

Estimated Percentage

Uncollectible

3%

6%

13%

25%

50%

Total Estimated Bad Debts

$ 38,610

$ 4,560

$ 1,920

$ 3,380

$ 8,750

$ 20,000

At December 31, 2014, the unadjusted balance in Allowance for Doutful Accounts is a credit of $12,000.

Instructions:

(a) Journalize and post the adjusting entry for bad debts at December 31, 2014.

(b) Journalize and post the allowance account the following events and transactions in the year 2015.

(1) On March 31, a $1,000 customer balance originating in 2014 is judged uncollectible.

(2) On May 31, a check for $1,000 is received from the customer whose account was written off as uncollectible

on March 31.

( c) Journalize the adjusting entry for bad debts on December 31, 2015, assuming that the unadjusted balance in

the Allowance for Doubtful Accounts is a debit of $800 and the aging schedule indicates that total estimated bad

debts will be $31,600.

NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

Fill in the sheet.

(a) Account name _______________

Account name __________________

Bad Debt
Date	Explanation				Ref.	Debit	Credit	Balance
2014
Dec. 31	Adjusting					value		Value

Allowance for Doubtful Accounts
Date	Explanation				Ref.	Debit	Credit	Balance
2014
Dec. 31	Balance							12,000
Dec.31	Adjusting						Value	?
2015
Mar. 31						Value		?
31-May							Value	?

	2015
(b) (1)	Mar. 31	Account					Value
			Account					Value
(b) (2)	2015
	May 31	Account					Value
			Account					Value
	May 31	Account					Value
			Account					Value
(c)	2015
	Dec 31	Account					Value
			Account					Value

PART B

P9-2B Compute bad debt amounts
Information related to Miracle Company for 2014 is summarized below:
	Total credit sales	$1,000,000
	Accounts receivable at December 31	369,000
	Bad debts written off	22,150
Instructions:
(a)	What amount of bad debt expense will Miracle Company report if it uses the direct
	write-off method of accounting for bad debts?
(b)	Assume that Miracle Company decides to estimate its bad debt expense to be 2% of
	credit sales. What amount of bad debt expense will Miracle record if Allowance for
	Doubtful Accounts has a credit balance of $3,000?
(c)	Assume that Miracle Company decides to estimate its bad debt expense based on 5%
	of accounts receivable. What amount of bad debt expense will Miracle Company
	record if Allowance for Doubtful Accounts has a credit balance of $4,000?
(d)	Assume the same facts as in (c), except that there is a $2,000 debit balance in
	Allowance for Doubtful Accounts. What amount of bad debt expense will Miracle record?
( e )	What is the weakness of the direct write-off method of reporting bad debt expense?
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

Fill in the VALUES AND BLANKS

(a)

Amount of bad debt expense if direct write-off method is used

Value

			Balance
(b)	Balance, Allowance for Doubtful Account		$3,000	CR
	Bad debt expense:
	Total credit sales	$1,000,000
	Estimated bad debt percentage	2%
	Total estimated bad debt expense		?
	Amount to be recorded as bad debt expense		?

(c )			Balance
	Balance, Allowance for Doubtful Account		$4,000	CR
	Bad debt expense:
	Accounts Receivable, Dec 31	Value
	Estimated bad debt percentage	5%
	Total estimated bad debt expense		?
	Amount to be recorded as bad debt expense		?

(d)			Balance
	Balance, Allowance for Doubtful Account		$2,000	DR
	Bad Debt expense:
	Accounts Receivable, Dec 31	Value
	Estimated bad debt percentage	5%
	Total estimated bad debt expense		?
	Amount to be recorded as bad debt expense		?

(e)	Weakness of the Direct Write-Off Method ______________________________________________________________________________________