Question 1
The Kingsmill Furniture Company sells its products, offering 30days’ credit to its customers. Uncollectible amounts are estimatedto be equal to 2% of credit sales. At the end of the year, theallowance for doubtful accounts is adjusted based on an aging ofaccounts receivable. The company began 2017 with the followingbalances in its accounts:
Accountsreceivable $305,000
Allowance for doubtful accounts (25,500)
During 2017, sales on credit were $1,300,000, cash collectionsfrom customers were $1,250,000 and actual write-offs of accountswere $25,000. An aging of accounts receivable at the end of 2017indicates a required allowance of $30,000.
Required:
1. Determine the balances in accounts receivable and allowancefor doubtful accounts at the end of 2017.
2. Determine the bad debt expense for 2017.
3. Prepare journal entries to accrue bad debts, write-off thereceivables, and the year-end adjusting entry required to adjustthe allowance for doubtful accounts to the required allowance of$30,000. Include explanations for each journal entry.
