A Company That Uses the Percent of Sales to Account

question 93

Essay

A company that uses the percent of sales to account for its bad debts had credit sales of $740,000 in Year 1, including a $720 sale to Marshall Fresh. On December 31, Year 1, the company estimated its bad debts at 1.5% of its credit sales. On June 1, Year 2, the company wrote off, as uncollectible, the $720 account of Marshall Fresh. On December 21, Year 2, Marshall Fresh unexpectedly paid his account in full. Prepare the necessary journal entries:
(a) On December 31, Year 1, to reflect the estimate of bad debts expense.
(b) On June 1, Year 2, to write off the bad debt.
(c) On December 21, Year 2, to record the unexpected collection.

Understand the accounting for sales returns and allowances and their impact on accounts receivable.

Know how to record and post transactions in special journals.

Comprehend the importance and use of subsidiary ledgers and control accounts to maintain detailed accounting information.

Understand the procedures for proving the equality of the totals in the columns of special journals and in the subsidiary ledgers.

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Definitions:

Dietary Behaviors

The eating habits and choices that an individual routinely makes, impacting their overall health and nutritional status.

Education

The process of facilitating learning, acquiring knowledge, skills, values, beliefs, and habits through various methods.

Food Management Tool

Software or systems used to plan, control, and manage food preparation and consumption.

Structured Eating Plan

A carefully planned diet, designed to facilitate healthy eating habits, often used for weight management or specific nutritional requirements.