Problem:
The ledger of Houston's Company at the end of the current year shows an A/R balance of $150,000, Sales $1,000,000 and Sales Returns and Allowances of $25,000.
Part A - Houston's customer Bryant, Inc has gone bankrupt. Their only invoice for $5,250 has to be written off using the direct write off method. Prepare the journal entry for this.
Part B - If the company's Allowance for Doubtful Accounts has debit balance of $1,000 in the Trial Balance, prepare the journal entry if the write off for Bad Debt Expense is to be:
(1) 2% of net sales and also
(2) 6% of A/R
(prepare two journal entries)
Part C - If the company's Allowance for Doubtful Accounts has a credit balance of $500 in the Trial Balance, prepare the journal entries if the write off for Bad Debt Expense is to be:
(1) 1.5% of net sales and also
(2) 5% of A/R
Prepare two journal entries.