Emma's Clothes, Inc. has accounts receivable of $210,000. In the current economy, she has noticed an increase in uncollectible accounts. In 2018, her sales were $3,200,000 and in 2019, sales were $3,800,000. Before 2019, she estimated that 2% of sales would eventually be uncollectible. In 2019, Emma believes that her losses were closer to 3% in 2018. She has recorded bad debt expense of 2% for 2018. Does she need to make a retroactive correction for 2018, and should she add an additional adjustment to 2019? If so, write the journal entry for the year-end adjustment in 2019. She has already recorded 2% of sales for bad debts in 2019 for 2019 sales.

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The Answer of Emma's Clothes, Inc. has accounts receivable of $210,000. In the current economy, she has noticed an increase in uncollectible accounts. In 2018, her sales were $3,200,000 and in 2019, sales were $3,800,000. Before 2019, she estimated that 2% of sales would eventually be uncollectible. In 2019, Emma believes that her losses were closer to 3% in 2018. She has recorded bad debt expense of 2% for 2018. Does she need to make a retroactive correction for 2018, and should she add an additional adjustment to 2019? If so, write the journal entry for the year-end adjustment in 2019. She has already recorded 2% of sales for bad debts in 2019 for 2019 sales.