The following information has been obtained about Elzevir Inc. (Elzevir) for 2014. The information was obtained before any year-end adjusting entries were made.

Required

a. Calculate the bad debt expense that Elzevir would record for the 2014 fiscal year, assuming that management expects that 4.5 percent of year-end accounts receivable won't be collected. What would be the balance in allowance for uncollectible accounts on March 31, 2014? Prepare the journal entry to record the bad debt expense.

b. Calculate the bad debt expense that Elzevir would record for the 2014 fiscal year, assuming that management expects that 0.5 percent of credit sales during fiscal 2014 won't be collected. What would be the balance in allowance for uncollectible accounts on March 31, 2014? Prepare the journal entry to record the bad debt expense.

c. What would your answers in (a) and (b) be if the balance in allowance for uncollectible accounts on March 31, 2014 (before any year-end adjusting entries), was a credit of $9,750? Explain any differences you find.

Transcribed Image Text:

Elzevir's year-end is March 31: Accounts receivable on March 31, 2014 Credit sales for the year ended March 31, 2014 Allowance for uncollectible accounts on March 31, 2014 (debit balance) $ 800,000 7,525,000 9,750