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.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.2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its May 31 balance sheet.
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 |
| ? | ? | ? | ? | ? |
| Calculation: Accounts Receivable $375,800 + 415,200 - 465,800 - 15,800 = | $309,400 |
| 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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