Question 1. (30 points)

Delta Co. reports the following financial information before adjustments on December 31, 2020.

	Dr.		Cr.
Accounts Receivable	100,000
Allowance for Doubtful Accounts			2,000

Required

a) Prepare the journal entry to record Bad Debt Expense assuming that the company estimates bad debts at 3% of accounts receivable, and calculate the cash realizable value for Accounts Receivable. (10 points). Explain your solution using T-accounts (5 points)

b) Prepare the journal entry to record the write-off of $1,500 from accounts receivable and calculate the cash realizable value for Accounts Receivable after the write-off. (10 points). Explain your solution using T-accounts (5 points)

Solution

a)

JOURNAL ENTRY
DATE	ACCOUNT TITLES	DEBIT	CREDIT

Cash realizable value for Accounts Receivable

Explanation using T-accounts:

b)

JOURNAL ENTRY
DATE	ACCOUNT TITLES	DEBIT	CREDIT

Cash realizable value for Accounts Receivable

Explanation using T-accounts: