REQUIRED

Johnson Corporation’s unadjusted Trial Balance at year end included the following
accounts:

Debit Credit
Sales (75% represent credit sales $1,152,000
Accounts Receivable $288,000
Allowance for Doubtful Accounts $2,184

Compute the uncollectable account expense, and make the appropriate Journal
entry. For the current year assuming the uncollectible account expense is
determined as follows:

A. Without considering the balance in the Allowance for Doubtful Accounts,

Income statement approach, 1% of total sales

In order to calculate to the income statement approach of 1% total sales,

ordinarily the total sales amount will be multiplied by 1%

1% Total Sales = $1,152,000 x 1%

= $11,520

JOURNAL ENTRY

Debit Credit
Uncollectable Accounts Expense $11,520

Allowance for Uncollectible Accounts $11,520

B. Without considering the balance in the Allowance for Doubtful Accounts,

Income statement approach, 1.5% of Credit sales.

To calculate the income statement approach of 1.5% the total of the credit
sales of 75% must be calculated

75% of the Credit sales =$1,152,000 x 75%

= $864,000

Once the 75%, if the credit sales have been calculated the income statement
approach of 1.5% of the credit sales can be calculated.
 Income Statement approach of Credit Sales
= $864,000 x 1.5%
= $12,960

JOURNAL ENTRY

Debit Credit
Uncollectable Accounts Expense $12,960

Allowance for Uncollectible Accounts $12,960

C. Considering the balance in the Allowance for Doubtful Accounts, balance

sheet approach. The estimate based on an aging of accounts receivable is that
an allowance of $12,000 would be appropriate.

To determine the appropriate account balance, the doubtful accounts must be

deducted from the allowance.

Appropriate Allowance = Allowance – Allowance for Doubtful Accounts

= $12,000 - $2,184
= $9,816

JOURNAL ENTRY

Debit Credit
Uncollectable Accounts Expense $9,816

Allowance for Uncollectible Accounts $9,816

References

Walther, L. (2012) Principles of Accounting. Chapter 7. Approaches for

Uncollectibles. Retrieved from
https://www.principlesofaccounting.com/chapter-7/approaches-for-
uncollectibles/