Question

During its first year of​ operations, Fall Wine Tour earned net credit sales of $311,000. Industry experience suggests that bad debts will amount to 3​% of net credit sales. At December​ 31, 2018​, accounts receivable total $44,000. The company uses the allowance method to account for uncollectible.
Read the requirements:
1) Journalize Fall Wine Tour's Bad Debts Expense using the​ percent-of-sales method.
2) Show how to report accounts receivable on the balance sheet at December 31, 2018.

Answer 1

Answer:

The computations are shown below:

Explanation:

The journal entry is as follows

1. Bad debt expense $9,330

       To Allowance for doubtful debts $9,330

(Being the bad debt expense is recorded)

The computation is shown below:

= $311,000 × 3%

= $9,330

For recording this transaction, we debited the bad debt expense as it increases the expenses account while at the same time it reduces the account receivable so the allowance would be credited

2. And, the reporting of account receivable is shown below:

Accounts receivable                          $44,000  

Less: Allowance for doubtful debts (9,330)  

Net Accounts receivable                  34,670