Brasser Co. started using the percentage of sales method to account for bad debts in 2021. In 2020, the company's first fiscal year, the company had used the direct write-off method because the amount of bad debts was judged to be immaterial. The following information relates to the company's sales and receivables.
$$\begin{array} { | l | r | r | }
\hline & 2020 & 2021 \
\hline \text { Credit sales } & \$ 18,750,000 & \$ 18,900,000 \
\hline \text { Estimated bad debts as a percentage of credit } & & \
\text { sales } & 0.5 \% & 0.4 \% \
\hline \text { Accounts written off } & 65,750 & 93,600 \
\hline
\end{array}$$ Required:
a. Calculate the correct balance in the allowance for doubtful accounts (ADA)at the end of 2021. Remember to include the effect of the change in accounting policy on 2020 accounts.
b. Record the write-off entry for 2021 and the year-end adjusting entries for 2021 to adjust the ADA. (Ignore income tax effects)

Question

Brasser Co. started using the percentage of sales method to account for bad debts in 2021. In 2020, the company's first fiscal year, the company had used the direct write-off method because the amount of bad debts was judged to be immaterial. The following information relates to the company's sales and receivables.
 $$\begin{array} { | l | r | r | } 
\hline & 2020 & 2021 \
\hline \text { Credit sales } & \$ 18,750,000 & \$ 18,900,000 \
\hline \text { Estimated bad debts as a percentage of credit } & & \
\text { sales } & 0.5 \% & 0.4 \% \
\hline \text { Accounts written off } & 65,750 & 93,600 \
\hline
\end{array}$$ Required:
a. Calculate the correct balance in the allowance for doubtful accounts (ADA)at the end of 2021. Remember to include the effect of the change in accounting policy on 2020 accounts.
b. Record the write-off entry for 2021 and the year-end adjusting entries for 2021 to adjust the ADA. (Ignore income tax effects)

Quizplus · Accepted Answer

The Answer of Brasser Co. started using the percentage of sales method to account for bad debts in 2021. In 2020, the company's first fiscal year, the company had used the direct write-off method because the amount of bad debts was judged to be immaterial. The following information relates to the company's sales and receivables.
 $$\begin{array} { | l | r | r | } 
\hline & 2020 & 2021 \
\hline \text { Credit sales } & \$ 18,750,000 & \$ 18,900,000 \
\hline \text { Estimated bad debts as a percentage of credit } & & \
\text { sales } & 0.5 \% & 0.4 \% \
\hline \text { Accounts written off } & 65,750 & 93,600 \
\hline
\end{array}$$ Required:
a. Calculate the correct balance in the allowance for doubtful accounts (ADA)at the end of 2021. Remember to include the effect of the change in accounting policy on 2020 accounts.
b. Record the write-off entry for 2021 and the year-end adjusting entries for 2021 to adjust the ADA. (Ignore income tax effects)

Brasser Co Required: A

Brasser Co Required:
A