Recording Accounts Receivable Transactions Using the Allowance Method
Intel Corporation is a well-known supplier of computer chips, boards, systems, and software building blocks. Assume the company recently reported the following amounts in its unadjusted trial balance at its year-end of December 27, 2008 (all amounts in millions):
Allowance for Doubtful Accounts
Sales (assume all on credit)
1. Assume Intel uses ¼ of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.
2. Assume instead that Intel uses the aging of accounts receivable method and estimates that $40 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at December 27, 2008, for recording Bad Debt Expense.
3. Repeat requirement 2, except this time assume the unadjusted balance in Intel’s Allowance for Doubtful Accounts at December 27, 2008, was a debit balance of $20.
4. If one of Intel’s main customers declared bankruptcy in 2009, what journal entry would be used to write off its $15 balance?