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Prepare the journal entry to recognise required allowance

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Reference no: EM133081431

Question - Rabbit Ear Pet Food Ltd traditionally has 35% of its sales in cash and the remaining on a 60-day credit basis. The following information has been extracted from the accounting records;

Accounts Receivable as at 1 January 2021 565,000

Allowance for Doubtful Debt as at 1 January 2021 3,500 (Cr)

Sales Revenue during 2021 785,000

Credit Sales Return and Allowances during 2021 40,000

Cash Collected from Credit Sales 310,000

Required - Assume Rabbit Ear Pet Food Ltd uses the percentage of net credit sales method to estimate Doubtful Debts Expense. After analysing industry averages and prior year's activity, management has determined that the Allowance for Doubtful Debts for 2016 should be 6% of net credit sales. Prepare the journal entry to recognise the required Allowance for Doubtful Debts.

Reference no: EM133081431

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