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Problem #2 - Credit Sales terms:
Problem #2
- Credit Sales terms: 2%/10 days and n/30 days on all accounts
- January 1, 2014 balance of Accounts Receivable was $39,500 with a credit balance of $15,000 in the Allowance for Doubtful Accounts.
- On July 5, 2014 an Accounts Receivable balance from a customer of 10,000 was determined to be uncollectable and was written off.
- The company determines bad debt expense based on an aging analysis based on 4 time periods at the end of the year.
- Not yet due: 1% (Outstanding Balance: 5,000)
- Up to 6 months past due: 5% (Outstanding Balance: 30,000)
- 6 to 12 months past due: 20% (Outstanding Balance: 20,000)
- Greater than 12 months past due: 50% (Outstanding Balance 8,000)
Required:
Prepare journal entries for each transaction:
- To record the July 5 Account Receivable balance
- To record bad debt expense given the company using the Allowance for Doubtful Accounts
