On September 30, Waldon Co. has $540,250 of accounts receivable. Waldon uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful accounts of $13,750.1. Prepare journal entries to record the following selected October transactions. The company uses the perpetual inventory system. 2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its October 31 balance sheet.a. Sold $305,000 of merchandise (that cost $178,500) to customers on credit.b. Received $395,100 cash in payment of accounts receivable.c. Wrote off $15,700 of uncollectible accounts receivable.d. In adjusting the accounts on October 31, its fiscal year-end, the company estimated that 4.0% of accounts receivable will be uncollectible.
What will be an ideal response?
1.
| a. | ? | Accounts Receivable..................................................... | 305,000 | ? |
| ? | ? | Sales........................................................ | ? | 305,000 |
| ? | ? | Cost of goods sold........................................ | 178,500 | ? |
| ? | ? | Merchandise Inventory........................... | ? | 178,500 |
| b. | ? | Cash............................................................. | 395,100 | ? |
| ? | ? | Accounts Receivable............................... | ? | 395,100 |
| c. | ? | Allowance for Doubtful Accounts................ | 15,700 | ? |
| ? | ? | Accounts Receivable............................... | ? | 15,700 |
| d. | ? | Bad Debts Expense *................................... | 19,328 | ? |
| ? | ? | Allowance for Doubtful Accounts.......... | ? | 19,328 |
Allowance for doubtful accounts before adjustment= $13,750 ? $15,700 = $1,950 debit
Uncollectible = $434,450 * .04 = $17,378; $17,378 + $1,950 = $19,328 bad debt expense
2.
| Current assets | ? | ? |
| Accounts Receivable | $434,450 | ? |
| Less: Allowance for Doubtful Accounts | 17,378 | $417,072 |
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