Instruction: Answer all questions. Show all workings. Two companies have asked y
ID: 2337439 • Letter: I
Question
Instruction: Answer all questions.
Show all workings.
Two companies have asked you to record journal entries in two different areas associated with receivables, at the end of 2017.
Company I
Mandalay Company requests that you record journal entries for its bad debt expense and uncollectible accounts receivable in 2017. Mandalay’s January 1, 2017, balances relevant to accounts receivable are as follows:
Dr Cr
Accounts receivable $400,000
Allowance for doubtful accounts $20,000
During 2017:
• $45,000 of accounts receivable were uncollectible, and no more effort to collect these accounts will be made.
• Total sales were $1,200,000, of which $200,000 were cash sales.
• $900,000 was collected on account.
Required:
a. i) If Mandalay used the credit sales method to estimate bad debt expense and uses 4% of credit sales as its estimate of bad debts, provide the journal entries at December 31 to record writeoffs and bad debts expense for 2017. [6 marks]
ii) Provide the December 31, 2017, Statement of Financial Position disclosure for net accounts
receivable. [12 marks]
b. i) If Mandalay decided to use the accounts receivable method to estimate net accounts receivable, and uses 9% of accounts receivable at year end as its estimate of uncollectibles, provide the journal entries at December 31 to record write-offs and bad debt expense for 2017.
[15 marks]
ii) Provide the December 31,2017, balance sheet disclosure for net accounts receivable.
[3 marks]
Explanation / Answer
Hey there !!
I will help you with the recording of Bad debts and Account receivables!
Let us start step by step:
Under Credit Sales Method Approach Opening Balance Dr Cr Accounts receivable $400,000 Allowance for doubtful accounts $20,000 During the Year Uncollectible Accounts $45,000 Total Sales (A) $1,200,000 Cash Sales (B) $200,000 Credit Sales (A-B) $1,000,000 Cash Collected on credit Sales $900,000 Estimated Bad debts Rate 4% Estimated Allowance for bad debts (4% of Credit Sales) $40,000 (4% of 1000000)