Innovative Tech Inc. (ITI) uses the percentage of credit sales method to estimat

Question

Innovative Tech Inc. (ITI) uses the percentage of credit sales method to estimate bad debts each month and then uses the aging method at year-end. During November, ITI sold services on account for $150,000 and estimated that 1/4 of one percent of those sales would be uncollectible. At its December 31 year-end, total Accounts Receivable is $83,400, aged as follows: (1) 1-30 days old, $69,000; (2) 31-90 days old, $11,000; and (3) more than 90 days old, $3,400. Experience has shown that for each age group, the average rate of uncollectibility is (1) 11 percent, (2) 22 percent, and (3) 44 percent, respectively. Before the end-of-year adjusting entry is made, the Allowance for Doubtful Accounts has a $1,300 credit balance at December 31. Required: 1. Prepare the November adjusting entry for bad debts. (If no entry is required for a transactionlevent, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the adjusting entry for bad debts as of November 30. Note: Enter debits before credits. Date General Journal Debit Credit Nov 30

Explanation / Answer

1. Nov 30 adjusting entry

$375

2.

3.

4.

Balance sheet:

Account receivable=$84,300

Less allowance for doubtful account=$11506

Net receivables=$72,794

Nov 30 Bad debt expense(150000×1%×1/4) $375 Allowance for doubtful account

$375

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---