Question

Prepare the journal entry to record the end-of-period adjustment for bad debts under the (a) percentage of credit sales method and (b) aging of accounts receivable method. (If no entry is required for a transaction/event, select “No Journal Entry Required” in the first account field.)

Entry 1

Assume Simple Co. had credit sales of $260,000 and cost of goods sold of $155,000 for the period. Simple uses the percentage of credit sales method and estimates that 1 percent of credit sales would result in uncollectible accounts. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $300. Record the transaction.

Entry 2

Assume that Simple Co. had credit sales of $260,000 and cost of goods sold of $155,000 for the period. Simple uses the aging method and estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $3,400. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $300. Record the transaction.