WHITE BOARD REVIEW

Question 1

• Accounts Receivable – $5,000 • Net Sales - $10,000 • Management estimates that 5% of sales will be uncollectible this year. • What is the journal entry (allowance method)?

– DR: Bad debt expense $500 – CR: Allowance for doubtful accounts $500

Question 2

• Accounts Receivable – $15,000 • Net Sales - $100,000 • A customer is not able to pay off their account of $7,000 – Direct write off is used. • What is the journal entry?

– DR: Bad debt expense $7,000 – CR: Accounts Receivable $7,000

Question 3

• Accounts Receivable – $15,000 • Net Sales - $100,000 • A customer is not able to pay off their account of $700. Allowance method is used.

• What is the journal entry?

– DR: Allowance for doubtful accounts $700 – CR: Accounts Receivable $700

# Days Outstandin g

0-30 31-60 61-90 Over 90

Total

Question 4

% Uncolle Amount ctible

31,000.00 5,210.00 1,540.00 500.00 3% 6% 12% 24%

Total Uncollectible 38,250.00 -

• Previous balance last year in AFDA of $1000. • What is the journal entry for bad debts?

– DR: Bad Debt Expense $547.40

– CR: Allowance for doubtful accounts. $547.40

Adjusting for…

• Percentage of Sales – Bad debt expense j/e is always the percentage of sales for that period. • Percentage of Receivables – If 2010 has a current AFDA balance of $10,000 and 2011 managements estimate is $11,000… What is the adjusting entry?

– ** Important to account for last years balance!