Use the information presented in BE7-5 for Wilton, Inc.

(a) Instead of an Allowance for Doubtful Accounts Balance of \(2,400 credit, the balance was \)1,900 debit. Assume that 10% of accounts receivable will prove to be uncollectible. Prepare the entry to record bad debt expenses.

(b) Instead of estimating uncollectible based on a percentage of receivables, assume Wilton prepares an aging schedule that estimates total uncollectible accounts at \(24,600. (Assume an allowance of \)2,400 credit.) Prepare the entry to record bad debt expenses.

BE7-5 (L03) Wilton, Inc. had net sales in 2017 of \(1,400,000. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable \)250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 8% of its receivables will prove to be uncollectible, prepare the December 31, 2017, journal entry to record bad debt expense.

Step by step solution

01

Definition of Accounts Receivables

Accounts receivables is an account that usually includes credit sales made by the business entity for which the debtor has not made payment. It is reported in the balance sheet on its net realizable value.

02

Journal entry for bad debt expenses

Date	Accounts and Explanation	Debit $	Credit $
31 Dec 2017	Bad Debt expenses $\left[\left(\$250,000\times 10\%\right)+\$1,900\right]$	$26,900
	Allowance for doubtful accounts		$26,900

03

Journal entry for bad debt expenses

Date	Accounts and Explanation	Debit $	Credit $
31 Dec 2017	Bad Debt expenses $\left(\$24,600-\$2,400\right)$	$22,200
	Allowance for doubtful accounts		$22,200

Unlock Step-by-Step Solutions & Ace Your Exams!

• Full Textbook Solutions

  Get detailed explanations and key concepts

• Unlimited Al creation

  Al flashcards, explanations, exams and more...

• Ads-free access

  To over 500 millions flashcards

• Money-back guarantee

  We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!