On May 31, Cray has $375,800 of accounts receivable. Cray uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $14,250.1. Prepare journal entries to record the following selected May transactions. The company uses the perpetual inventory system.2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its May 31 balance sheet.a. Sold $415,200 of merchandise (that cost $249,000) to customers on credit.b. Received $465,800 cash in payment of accounts receivable.c. Wrote off $15,800 of uncollectible accounts receivable.d. In adjusting the accounts on May 31, its fiscal year-end, the company estimated that 4.0% of accounts receivable will be uncollectible.
What will be an ideal response?
| a. | ? | Accounts Receivable | 415,200 | ? |
| ? | ? | Sales | ? | 415,200 |
| ? | ? | Cost of goods sold | 249,000 | ? |
| ? | ? | Merchandise Inventory | ? | 249,000 |
| ? | ? | ? | ? | ? |
| b. | ? | Cash | 465,800 | ? |
| ? | ? | Accounts Receivable | ? | 465,800 |
| ? | ? | ? | ? | ? |
| c. | ? | Allowance for Doubtful Accounts | 15,800 | ? |
| ? | ? | Accounts Receivable | ? | 15,800 |
| ? | ? | ? | ? | ? |
| d. | ? | Bad Debts Expense | 13,926 | ? |
| ? | ? | Allowance for Doubtful Accounts | ? | 13,926 |
| ? | ? | ? | ? | ? |
Allowance for Doubtful Accounts before adj. $14,250 ? 15,800 = $1,550 debit
Desired balance in Allowance Account ($309,400 * .04) = $12,376 credit
Amount of bad debts expense $13,926
| 2. | Current assets |
| Accounts Receivable | $309,400 |
| Less: Allowance for Doubtful Accounts | 12,376 | $297,024 |
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