[Johnnie3435]

Sold $,345,434 of merchandise (that cost $975,000 on credit, terms n/30.
Wrote off $18,300 of uncollectible accounts receivable.
Received $669,200 cash in payment of accounts receivable.
In adjusting the accounts on 12/31 the company estimated that 1.5% of accounts receivable will be uncollectible.

Can you help me prepare journal entries to summarized transactions and its year end adjustments to record bad debts expense (the company uses the perpetual inventory systemand it applies the allowance method)

[pready]

For the first transaction of selling merchandise you will have 2 journal entries. One to record the sale to a customer and one to record the cost of the merchandise sold.

For the sale you will Debit Accounts Receivable and Credit Sales Revenue for the amount of the sale.

For the cost of merchandise you will Debit Cost of Goods Sold and Credit Merchandise Inventory for the cost of merchandise sold.

For the write-off of accounts receivable using the direct write-off method your journal entry will be a Debit to Bad Debt Expense and a Credit to Accounts Receivable for the amount given.

Receiving cash on accounts receivable is a Debit to Cash and a Credit to Accounts Receivable for the amount of cash received.

For the percentage of accounts receivable that will be uncollectible you first have to determine the balance in your accounts receivable account. So take the amount of your credit sales minus the amount of cash paid on accounts receivable minus the amount that was wrote off on accounts receivable equals your ending accounts receivable balance.

Now you have the ending accounts receivable balance you have to determine the amount that will be written off. So take your ending accounts receivable balance times your percentage to be written off equals your write off amount.

Your journal entry using the allowance write-off method is a Debit to Allowance for Doubtful Accounts and Credit Accounts Receivable for the amount calculated above.

Note: The Allowance for Doubtful Accounts is a contra asset account which means it will appear on the balance sheet.