Problem 11: The Gadzooks Chip Company offers credit terms to its customers. At t
ID: 2579409 • Letter: P
Question
Problem 11: The Gadzooks Chip Company offers credit terms to its customers. At the end of 2013, accounts receivable totaled S2,223,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of S68,000 at the beginning of 2013 and $46,200 in receivables was written off during the year as uncollectible. No previously written off receivables were collected. The company estimates bad debts by applying a percentage of 3% to accounts receivable at the end of the year. . Propaurejournal cnty to record he wr f of reetvabes 2. Prpare jourmal cnuris to reandthe ear nd rnad et apense. Show your computation owwcomts 0er and balanse se 4. The company made $3,500,000 net credit sales during the year. If the company had used income statement approach to charge 1% of net credit sales to bad debt expense, how would it be recorded in journal entry? Would it have increased or decreased the amount set aside as allowance for uncollectible accounts?Explanation / Answer
Note for Journal Entries Notes: 1 Allowance for Doubtfull Debts (Opening Bal.) $ -68,000 Credit New Write off $ 46,200 Debit Net Balance $ -21,800 Less: Closing Balance Estimated at end ($ 22,23,000 * 3%) $ 66,690 Credit Balance to be create the provision $ 44,890 Credit Notes: for 4 Total Credit Sales = $ 35,00,000 Bad Debts Expected = 1% $ 35,000 It will reduce the amount set aside as allowance for uncollectable aacount Journal Entries Date Account Title and explanation Debit Credit Allowance for Doutfull Debts $ 46,200 1 To Account Receivable $ 46,200 (To Record the write off the customer account) Bad Debt Expenses $ 44,890 2 To Allowance for Doubbtful Debts $ 44,890 (To Record the allowance for Doubtfull Debts) 4 Allowance for Doutfull Debts $ 35,000 To Account Receivable $ 35,000 (To Record the bad debts of 1% of net credit sales) Answer =3 : Amount shown in Balance sheet is as below, Account Recievable = $ 22,23,000 Less: Allowance for Doubtfull Debts $ 66,690 Net Balance in Account receivable $ 21,56,310