Question
Provide the following independent (a. b. c. ) journal entries: a. July 31, 2019. We had $800,000 of credit sales in July. We estimate that
Provide the following independent (a. b. c. ) journal entries:
a. July 31, 2019. We had $800,000 of credit sales in July. We estimate that our bad debt expense will be 1% of credit sales.
b. Aug. 15, 2019. We have an account receivable from Frank Farmworker for $700. On Aug. 15 we decide that we will not collect this account, so need to write it off. On Sept. 5 we get a check from Frank in the mail.
c. Dec. 31, 2019. Allowance for Bad Debts currently has a credit balance of $8,200. We perform an aging of accounts receivable, and determine that the Allowance should have a balance of $10,100.
d. Dec. 31, 2020. We age our accounts receivable:
Age of accounts .
Days: 1-30 31-60 61-90 91+ Total
Accounts receivable $85,000 $40,000 $10,000 $2,000 $137,000
Estimate % uncollectible 1% 3% 10% 50%
What balance should the Allowance for Bad Debts have?
Suppose the estimated % uncollectible is based on 2015-2019 data, but that the economy for 2020 is substantially worse. Would you change your estimated Allowance for Bad Debts? If you would change, how would you change it?
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