Pessimist Inc

question 26

Essay

Pessimist Inc. reported credit sales of $5,400,000 and $4,800,000 for the years ended December 31, 2011 and 2012, respectively. Information on trade accounts receivable for the company is presented below. The balance of the allowance for doubtful accounts as of January 1, 2011 was $15,000. In addition, you learn that the company wrote off specific accounts of $18,500 in 2011, and the bad debts expense was $13,000 in 2012.
Required:
a. Determine the bad debts expense for 2011.
b. Determine the amount of receivables written off during 2012.
c. Prepare the journal entry to record the bad debts expense for 2011.

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Definitions:

Mortgage Loans

Loans secured by real property through the use of a mortgage note, typically used to purchase real estate.

Moderate Incomes

Earnings that are neither too high nor too low, often associated with the middle class in a given society.

Interest Rates

The cost of borrowing money or the return for investing, expressed as a percentage of the principal, influencing consumer and business spending.

Interest-sensitive Goods

Products or services whose demand is heavily influenced by changes in interest rates, such as housing and automobiles.