Reference no: EM133150973

Question - Part A - Wellington, Inc. has 2020 credit sales of $45 million. The balance in Wellington's accounts receivable was $3 million as of December 31, 2020. Wellington estimates that its allowance for doubtful accounts should be equal to 5% of its gross accounts receivable.

Required - Prepare Waterford's adjusting journal entry to record bad debt expense at December 31, 2020, assuming that:

1. the balance in the allowance for doubtful accounts prior to any adjustment is $53,000 (credit).

2. the balance in the allowance for doubtful accounts prior to any adjustment is $24,000 (debit).

Part B - On May 15, 2020, Generic Corp. made a $40,000 sale on account with the following terms: 2/10, n/30. Generic uses the net method to record credit sales.

Required - 1) What is Generic's journal entry to record the sale on May 15, 2020?

2) What would be Generic's journal entry if the customer paid for this merchandise on May 24, 2020?

3) What would be Generic's journal entry if the customer paid on June 10, 2020 instead of May 24, 2020?