Reference no: EM132743925
Question: At the end of the current period, the accounting ledger of Blue Spruce Corp. shows an Accounts Receivable balance of $82,500 and Credit Sales of $762,240. The company has not yet recognized bad debt expense for the period.
Assume the Allowance for Doubtful Accounts has a credit balance of $1,080 in the trial balance, and that uncollectible accounts are expected to be 9% of gross Accounts receivable. Hint: this means the company will first determine the desired ending balance of the Allowance and then "back into" the required amount of bad debt expense.
- Show the adjusting entry at the end the period to recognize bad debt expense.
- Debit:
- Credit:
- What is the amount of net accounts receivable after recording the entry above?
Now assume (instead of the scenario above) that the Allowance for Doubtful Accounts has a debit balance of $480 in the trial balance, and that uncollectible accounts are expected to be 7% of gross Accounts receivable. (Note: A debit balance in the allowance occurs when write-offs in a period exceed the opening credit balance of the allowance. After we recognize bad debt expense, the allowance will once again have a credit balance, as is appropriate for a contra-asset account.)
- Show the adjusting entry at the end the period to recognize bad debt expense.
- Debit:
- Credit:
- What is the amount of net accounts receivable after recording the entry above?
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