Credit Losses Based on Credit Sales Gregg Company uses the allowance method for recording its expected credit losses. It estimates credit losses at three percent of credit sales, which were $900,000 during the year. On December 31, the Accounts Receivable balance was $150,000, and the Allowance for Doubtful Accounts had a credit balance of $12,200 before adjustment. a. Prepare the adjusting entry to record the credit losses for the year b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear in the December 31 balance sheet. a. General Journal Date Description Debit Credit Dec.31 Answer Answer Answer Answer Answer Answer To record allowance for credit losses. b. (Do not use negative signs with your answers) Current Assets: Answer Answer Answer Answer Answer

Part A: An adjusting journal entry is an section in a company's common record that happens at the conclusion of an bookkeeping period to record any unrecognized pay or costs for the period.

Part B: An allowance for doubtful accounts is considered a “contra asset,” since it decreases the sum of an resource, in this case the accounts receivable. The allowance, some of the time called a bad debt save, speaks to management's appraise of the sum of accounts receivable that will not be paid by customers.

"Journal Entries":

Part A:

The adjusting entry to record the credit losses for the year is :

Bad debt expense Dr, $27,000

To Allowance for Doubtful Accounts Cr. $27,000 ($900,000 × 3%)

(To record accounts deemed to be uncollectible)

Part B:

The Accounts Receivable and the Allowance for Doubtful Accounts on balance sheet would appear in the December 31 is :

Accounts Receivable $150,000

less: Allowance for Doubtful Accounts $39,200 ($12,200 + $27,000)

Net accounts receivable $110,800

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