Reference no: EM132406814

Accounts Receivables and Allowance Method

1) Landow Co. is a large wholesaler of chairs. At the end of 2019, the company's controller estimates 8% of the $896,000 in Accounts Receivable will be uncollectible. a. Write the journal entry to record Bad Debt Expense for the period if the Allowance for Doubtful Accounts has a debit balance of $17,400 before this adjusting entry is posted:

b. How does the posting of this journal entry affect the accounting equation?

c. What is the Net Realizable Value of Accounts Receivable reported in Landow Co.'s balance sheet as of Dec. 31, 2019?

2) (Continuation of question 1). Assume that during 2019, a total of $36,750 Accounts Receivable has to be written off due to customers' inability to pay what they owe Landow Co.

a. What journal entry would be used to record this write-off of $36,750?

b. How does the posting of this journal entry affect the accounting equation?

c. What is the Allowance for Doubtful Accounts balance after this write off? (Your answer should indicate the amount and whether it is a Debit or Credit balance. Hint: Use a T-account to determine your answer.)

d. Landow Co. assumes that at the end of 2020, 9% of its new $780,000 Accounts Receivable balance will be uncollectible. Using the Allowance for Doubtful Accounts balance from above (question 2) c.) determine the Bad Debt Expense that would be recorded at the end of 2020 and enter the journal entry.