Question

Larkspur, Inc. had net sales in 2017 of $1,475,200. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable $212,500 debit, and Allowance for Doubtful Accounts $1,828 debit. Assume that 11% of accounts receivable will prove to be uncollectible. Prepare the entry to record bad debt expense.The account titles are correct butbad debt expenseallowance for doubtful accountsWhen I do the math of (212,500 x .11) - 1828 = 21547 the answer is wrong.same with the second partLarkspur, Inc. had net sales in 2017 of $1,475,200. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable $212,500 debit, and Allowance for Doubtful Accounts $3,410 credit. Assume Larkspur prepares an aging schedule that estimates total uncollectible accounts at $25,600. Prepare the entry to record bad debt expense.bad debt expense is rightallowance for doubtful expense is rightbut the math is wrong (25600-1828) = 23772

Answer 1

Answer:

• Prepare the entry to record bad debt expense.
• Assume that 11% of accounts receivable will prove to be uncollectible.

Dr Bad Debt Expense $ 25,203

Cr Allowance for Uncollectible Accounts $ 25,203

• Assume Larkspur prepares an aging schedule that estimates total uncollectible accounts at $25,600.

Dr Bad Debt Expense $ 22,190

Cr Allowance for Uncollectible Accounts $ 22,190

Explanation:

At December 31, 2017, before adjusting entries, the balances in selected accounts were  

Net sales $ 1,475,200

Dr Accounts receivable $ 212,500

Dr Allowance for Uncollectible Accounts $ 1,828

Assume that 11% of accounts receivable will prove to be uncollectible.  

Prepare the entry to record bad debt expense.  

Dr Bad Debt Expense $ 25,203

Cr Allowance for Uncollectible Accounts $ 25,203

Because the company already has a DEBIT balance ($1,828) in the Allowance for Doubtful Accounts  it's necessary to register an entry that COMPENSATE ($25,203) the existing value and reflect the value estimated as bad debts ($23,375).

Bad Debt Expense = $212,500 * 0,11 = $23,375

It's necessary to reflect this in the Allowance for Uncollectible Accounts as Credit, so we need an  entry of $25,203

Bad Debt Expense = $23,375 + $1,828 = $25,203

Balances in Accounts Receivable $212,500 debit, and Allowance for Doubtful Accounts $3,410 credit.  

Cr Allowance for Uncollectible Accounts $ 3.410

Assume Larkspur prepares an aging schedule that estimates total uncollectible accounts at $25,600. Prepare the entry to record bad debt expense  

Dr Bad Debt Expense $ 22,190

Cr Allowance for Uncollectible Accounts $ 22,190

Because the company already has a CREDIT balance ($3,410) in the Allowance for Doubtful Accounts it's necessary to register an entry that COMPLEMENT ($22,190) the existing value and reflect the value estimated as bad debts ($25,600).  

Bad Debt Expense = $25,600 - $3,410 = $22,190  

It's necessary to reflect $25,600 in the Allowance for Uncollectible Accounts as Credit, so we need an entry of $22,190.