FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:**Exercise: Calculating Bad Debt Expenses**
Funnel Direct recorded $1,344,780 in credit sales for the year and $698,455 in accounts receivable. The uncollectible percentage is 4.4% for the income statement method and 4% for the balance sheet method.
1. **Task A:** Record the year-end adjusting entry for 2018 bad debt using the income statement method.
- **Dec. 31**
- Debit: Bad Debt Expense
- Credit: Allowance for Doubtful Accounts
- To record bad debt, income statement method
2. **Task B:** Record the year-end adjusting entry for 2018 bad debt using the balance sheet method.
- **Dec. 31**
- Debit: Bad Debt Expense
- Credit: Allowance for Doubtful Accounts
- To record bad debt, balance sheet method
3. **Task C:** Assume there was a previous credit balance in Allowance for Doubtful Accounts of $13,788. Record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method.
- **Dec. 31 (Income Statement Method)**
- Debit: Bad Debt Expense
- Credit: Allowance for Doubtful Accounts
- To record bad debt, income statement method, previous credit balance
- **Dec. 31 (Balance Sheet Method)**
- Debit: Bad Debt Expense
- Credit: Allowance for Doubtful Accounts
- To record bad debt, balance sheet method, previous credit balance
**Instructions:**
- If an amount box does not require an entry, leave it blank.
- Round your answers to two decimal places.
Expert Solution
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Step 1
The process of recording business transactions in the books of accounts for the first time is known as journal entry. Journal entries serve as a foundation for further accounting operations such as the preparation of ledger accounts, trial balances, financial statements, and so on.
The initial recording of all monetary business transactions in a systematic way is known as journal entries. They are listed in chronological sequence according to when the incident occurred. Adjusting entries, closing entries, and normal entries are all examples of diary entries.
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