Ask Question
7 July, 23:50

Monty Company reports the following financial information before adjustments. Dr. Cr. Accounts Receivable $132,800 Allowance for Doubtful Accounts $2,810 Sales Revenue (all on credit) 806,700 Sales Returns and Allowances 51,060 Prepare the journal entry to record bad debt expense assuming Monty Company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but Allowance for Doubtful Accounts had a $1,480 debit balance. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

+2
Answers (1)
  1. 8 July, 02:30
    0
    Answer: The following journal entries apply:

    a) Debit Bad debt expense $32,727.6

    Credit Allowance for doubtful accounts $32,727.6

    b) Debit Bad debt expense $37,017.6

    Credit Allowance for doubtful accounts $37,017.6

    Explanation: All the sales revenue are on credit to the tune of $806,700, however, there was sales return and allowance of $51,060, which has to be deducted from credit sales to arrive at the net credit sales of $755,640. This amount would be added to the accounts receivable of $132,800 to arrive at the total accounts receivable of $888,440.

    a) 4% of $888,440 is $35,537.6. With credit balance of $2,810 in allowance for doubtful accounts, bad debt expense (addition) is $32,727.6 ($35,537.6 - $2,810).

    b) 4% of $888,440 is $35,537.6 and there is a debit balance of $1,480 in allowance for doubtful accounts, bad debt expense (to reinstate allowance account to $35,537.6) is $37,017.6 ($35,537.6 + $1,480).
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Monty Company reports the following financial information before adjustments. Dr. Cr. Accounts Receivable $132,800 Allowance for Doubtful ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers