Answer:
The journal entries are as follows:
(a) 5% of credit sales,
Bad debts expense A/c Dr. $15,900
To Allowance for doubtful accounts $15,900
(To record the bad debt expense)
Workings:
Uncollectibles:
= 5% × Credit sales
= 5% × $318,000
= $15,900
(b) 3% of total sales,
Bad debts expense A/c Dr. $37,080
To Allowance for doubtful accounts $37,080
(To record the bad debt expense)
Workings:
Uncollectibles:
= 3% × Total sales
= 3% × ($318,000 + $918,000)
= $37,080
(c) 8% of year-end accounts receivables,
Bad debts expense A/c Dr. $18,240
To Allowance for doubtful accounts $18,240
(To record the bad debt expense)
Workings:
Uncollectibles:
= (8% × year end accounts receivables) + Allowance for doubtful accounts balance
= (8% × $143,000) + $6,800
= $18,240
