Problem - The financial statements for Ivana Huggnow Corporation show the following balances as of December 31, 2014:
- Credit Sales: $10,000,000
- Sales Returns and Allowance: $100,000
- Sales Discounts: $200,000
- Accounts Receivable: $2,100,000
- Allowance for Doubtful Accounts: $104,000 (Debit)
- Notes Receivable: $240,000
QUESTIONS:
1. An aging of accounts receivable indicates that $194,000 is expected to become uncollectible as of December 31, 2014. If the percentage of receivables method is used, what is the balance is Allowance for Doubtful Accounts after any adjustment is made? (1 point)
2. Ignoring your answer to Question #1, based on its past history, Ivana Huggnow Corporation expects 2% of its net credit sales will become uncollectible as of December 31, 2014. If the percentage of net credit sales method is used, what adjusting entry, if any, should Ivana Huggnow Corporation make? (2 points)
3. The notes receivable consists of a single 4-month note, bearing interest at 10%. This note was given to Ivana Huggnow Corporation, by its customer, Nuts for You, Inc. on November 1, 2014. What adjusting entry, if any, should Ivana Huggnow Corporation make on December 31, 2014? (2 points)
SPECIFIC INSTRUCTIONS: If a journal entry is required, type your response in the following format:
DR (account name) $(amount)
CR (account name) $(amount)
For example, if you are making an entry to debit Cash for $100 and credit Accounts Payable for $100, you would enter the following:
DR Cash $100
CR Accounts Payable $100