Clarissa Company has credit sales of $550,000 during 2013 and estimates at the e
ID: 2380159 • Letter: C
Question
Clarissa Company has credit sales of $550,000 during 2013 and estimates at the end of 2013 that 2.5% of these credit sales will eventually default. Also, during 2013 a customer defaults on a $775 balance related to goods purchased in 2012. Prior to the write-off for the $775 default, Clarissa
Clarissa Company has credit sales of $550,000 during 2013 and estimates at the end of 2013 that 2.5% of these credit sales will eventually default. Also, during 2013 a customer defaults on a $775 balance related to goods purchased in 2012. Prior to the write-off for the $775 default, Clarissa's accounts receivable and allowance for doubtful accounts balances were $402,000 and $129 (credit), respectively. Required: Prepare the journal entry to record the defaulted account. Prepare the adjusting entry to record the bad debt expense for 2013.Explanation / Answer
1. Prepare the journal entry to record the defaulted account.
Debit: Allowance for Doubtful Accounts 775
Credit: Accounts Receivable 775
2. Prepare the adjusting entry to record the bad debt expense for 2013.
550,000*0.025 = 13750
Debit: Bad Debt Expense 13,750
Credit: Allowance for Doubtful Accounts 13,750