Week 4 Pre-assignment: Black River Wholesalers Guidance comes from pages 7 and 8 of notebook Black River is a wholesaler selling general merchandise to small sports retailers. All sales are on credit with 30 day terms. Black River started the 2015 financial year with accounts receivable of $205,000 and an allowance for bad debts of $15,000. At the end of each month, Black River records bad debt expense equal to 2% of sales. The following results occurred during 2015: Month Sales Accounts receivable written off Restorations of accounts receivable previously written off July January $120,000 $2,000 February 150,000 1,000 March 140,000 500 April 135,000 0 May 155,000 1,300 $1,800 June 170,000 2,500 180,000 2,500 August 140,000 2,000 September 130,000 0 October 145,000 1,500 November 160,000 3,500 December 180,000 2,000 Part A: Create a ledger account for the allowance for bad debts and record all of the above activity. Arrive at the balance in the allowance for bad debts prior to the arrival of the auditor. 5.000 Part B; Prior to the arrival of the auditor, accounts receivable total $370,000. Upon the arrival of the auditor, you are asked to do an aging schedule. Prior to doing the aging schedule, you are instructed to write off a receivable of $12,000 that is over a year old and the debtor has entered bankruptcy. The age and allowance to be provided are as follows: Age category Over 90 days 61-90 days 31 - 60 days 30 days or less Amount of receivables $40,000 80,000 70,000 Balance Percentage allowance required 40% 10% 5% 1% 180,000 Make the required adjusting entries and enter them into your allowance for bad debts ledger. Part C: Calculate total bad debt expense for the year