Question
The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2013, the allowance account had a credit balance
The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2013, the allowance account had a credit balance of $84,200. Credit sales for 2013 totaled $2,870,000 and the year-end accounts receivable balance was $510,000. During this year, $82,000 in receivables were determined to be uncollectible. Manda Panda anticipates that 2% of all credit sales will ultimately become uncollectible. The fiscal year ends on December 31. |
Required: |
1. | Does this situation describe a loss contingency? | |
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2. | What is the bad debt expense that Manda Panda should report in its 2013 income statement? |
3. | Prepare the appropriate journal entry to record the contingency. (If no entry is required for an event, select "No journal entry required" in the first account field.) |
4. | What is the net realizable value (book value) Manda Panda should report in its 2013 balance sheet? |
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