Question

Jarden Company has credit sales of \(3,600,000 for year 2017. On December 31, 2017, the company’s Allowance for Doubtful Accounts has an unadjusted credit balance of \)14,500. Jarden prepares a schedule of its December 31, 2017, accounts receivable by age. On the basis of past experience, it estimates the percent of receivables in each age category that will become uncollectible. This information is summarized here.

Required:

2. Prepare the adjusting entry to record bad debts expense at December 31, 2017.

Short answer

Answer

The amount of bad debt expense for 2017 will be $27,150.

Step-by-step solution

Step-by-Step SolutionStep 1: Meaning of Credit Sales

Credit sales refer to when goods are sold or delivered, but the payment will be received after some days.

Adjusting journal entry

Date	Particulars	Debit($)	Credit($)
Dec 31, 2017	Bad debt expense	27,150
	Allowance for doubtful accounts		27,150
	(To record the bad debt expense)

Calculation of Allowance for doubtful accounts

Age	Amount($)	Percentage	Allowance for doubtful accounts($)
Not yet due	830,000	1.25%	10,375
1 to 30 days	254,000	2%	5,080
31 to 60 days	86,000	6.50%	5,590
61 to 90 days	38,000	32.75%	12,445
Over 90 days	12,000	68%	8,160
		Total	$41,650

$$\begin{gathered} Baddebtexpense=Allowancefordoubtfulaccounts-Unadjustedcreditbalance \\ =\$41,650-\$14,500 \\ =\$27,150 \end{gathered}$$