Additional Hand-in Problem - Cartoons Inc.
The following information is provided regarding Cartoons Inc.'s accounts receivable and allowance for doubtful accounts:
Accounts Receivable, January 1, 2015 $1,200,000
Collections of Accounts Receivable during the year $1,900,000
Write-offs of Accounts Receivable $ 300,000
Accounts Receivable, December 31, 2015 $1,850,000
Allowance for Doubtful Accounts (December 31, 2015 balance (before bad debts adjusting entry) $ 155,000(debit)
Required:
(a) Calculate the credit sales for the year 2015.
(b) Provide the journal entry that was made to write-off the uncollectible amounts during 2015.
(c) Ignore your answer to (a) and assume that credit sales for 2015 were $4.75 million. Prepare the bad debts adjusting entry assuming that management estimates that 4.0% of the credit sales would be uncollectible.
(d) After recording your entry from part (c), is the balance in the allowance for doubtful accounts adequate? Explain.