Question
The Kingsmill Furniture Company sells its products, offering 30 days credit to its customers. Uncollectible amounts are estimated to be equal to 2% of credit
The Kingsmill Furniture Company sells its products, offering 30 days credit to its customers. Uncollectible amounts are estimated to be equal to 2% of credit sales. At the end of the year, the allowance for doubtful accounts is adjusted based on an aging of accounts receivable. The company began 2016 with the following balances in its accounts:
Accounts receivable $305,000
Allowance for doubtful accounts (25,500)
During 2016, sales on credit were $1,300,000, cash collections from customers were $1,250,000 and actual write-offs of accounts were $25,000. An aging of accounts receivable at the end of 2016 indicates a required allowance of $30,000.
Required:
1. Determine the balances in accounts receivable and allowance for doubtful accounts at the end of 2016.
2. Determine the bad debt expense for 2016
3. Prepare journal entries for to accrue bad debts, the write-off of receivables, and the year-end adjusting entry required to adjust the allowance for doubtful accounts to the required allowance of $30,000. Include explanations for each journal entry.
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