Clarissa Company has credit sales of $550,000 during 2013 and estimates at the e
ID: 2380160 • 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.
Allowance for doubtful accounts Dr $775
To Accounts Receivable $775
Bad Debts a/c Dr $775
To Allowance for doubtful accounts $775
2) Prepare the adjusting entry to record the bad debt expense for 2013.
Allowance for doubtful accounts Dr $13750
To Accounts Receivable $13750
Bad Debts A/c Dr $13750
To Allowance for doubtful accounts $13750
W.N: $550000 x 2.5% = $13750