Rogala Foods Inc was formed in 2015 with the merger of Grouc

Rogala Foods Inc. was formed in 2015 with the merger of Grouch Mayer and Tashamo Corporation. The company reported the following rounded amounts for the year ended January 3, 2016 (all amounts in millions): Debits Credits Accounts Receivable Allowance for Doubtful Accounts Sales (assume all on credit) $1,200 $ 30 19,100 Required 1. Assume Rogala uses 3/4 of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry 2. Assume instead Rogala uses the aging of accounts receivable method and estimates that $88 of its Accounts Receivable will be 3. Prepare the journal entry for unadjusted balance in Rogala\'s Allowance for Doubtful Accounts at January 3, 2016, was a debit 4. If one of Rogala\'s customers declared bankruptcy, what journal entry would be used to write off its $10 balance? required for the year, assuming no Bad Debt Expense has been recorded yet uncollectible. Prepare the adjusting journal entry required at January 3, 2016, for recording Bad Debt Expense. balance of $28. Complete this question by entering your answers in the tabs below

Solution

1.Calculation of Bad Debts amount =19100*1%*3/4 = 143.25

Journal entry

Bad Debts A/c.................................Dr 143.25

.....................To Accounts Receivable A/c.............143.25

(Being Bad debts expense recorded assuming that no bad debts were recorded yet)

2. Bad debt expense = 88

Journal Entry

Bad Debts A/c............................Dr 88

...............To Allowances for bad debts A/c 30

...............To Accounts receivable A/c 58

(Being Adjustment entry passed for bad debts with allowance)

3. Journal Entry

Bad Debts A/c...................................Dr 28

.................Allowance for bad debts A/c........28

(Being Adjustment entry passed)

4. Bad debts A/c ............................... Dr 10

......To Allowance for Bad debts A/c/ Profit & Loss A/c 10

(Being Bad debts recorded)

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