Question
The following information relates to Excellent Inc. for the year 2021: Sales for 2021 (90% on credit): $7,000,000 Accounts receivable as at Dec. 31, 2021:
The following information relates to Excellent Inc. for the year 2021: Sales for 2021 (90% on credit): $7,000,000 Accounts receivable as at Dec. 31, 2021: $275,000 Allowance for doubtful accounts as at Jan. 1, 2021: $8,000 CR Excellent estimates its bad debt expense during the year as 0.2% of net credit sales. On June 15, 2021, Excellent unexpectedly collected $4,500 of a previously written-off account. Excellent has a December 31 year end.
Required: a. Record the journal entries for: i. The collection of the previously written-off account on June 15; ii. Bad debt expense for the year. b. After the journal entries from a) had been completed, management reviewed the balance in the allowance for doubtful accounts and determined that it should be 5% of gross accounts receivable. Prepare the adjusting journal entry required.
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