Ch7. Video 7 - Percent of Sales example

The video tutorial explains the percentage of sales method for estimating uncollectible sales. It covers the process of calculating uncollectible sales using a 1% estimation, creating a journal entry for bad debt expense, and adjusting the Allowance for Doubtful Accounts (ADA) and Accounts Receivable (AR) to determine the net realizable value. The tutorial concludes with a preview of the next method to be discussed in a subsequent video.

What percentage of the year's sales does Juliet Company estimate to be uncollectible?

• 10%

• 1%

• 5%

• 2%

How much is the uncollectible amount calculated using the percentage of sales method?

• $500

• $800

• $600

• $700

What is the journal entry for recording the bad debt expense?

• Debit Bad Debt Expense $600, Credit Cash $600

• Debit Cash $600, Credit Bad Debt Expense $600

• Debit Allowance for Doubtful Accounts $600, Credit Bad Debt Expense $600

• Debit Bad Debt Expense $600, Credit Allowance for Doubtful Accounts $600

What is the new balance of the Allowance for Doubtful Accounts after the adjustment?

• $1500

• $400

• $600

• $1000

What is the net realizable value of accounts receivable after the adjustment?

• $59,000

• $58,500

• $59,500

• $60,000