Blue Devil Inc. has outstanding accounts receivable totaling $1.27 million as of December 31 and credit sales during the year of $6.4 million. There is also a debit balance of $3,000 in the allowance for doubtful accounts. The company estimates that 1% of its net credit sales will be uncollectible. Please record the year-end adjusting journal entry for uncollectible accounts based on the information above. Please show your calculation steps.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Blue Devil Inc. has outstanding accounts receivable totaling $1.27 million as of December 31 and credit sales during the year of $6.4 million. There is also a debit balance of $3,000 in the allowance for doubtful accounts. The company estimates that 1% of its net credit sales will be uncollectible.
Please record the year-end
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