At December 31, 2024, Cullumber Industries reports the following selected accounts from the unadjusted trial balance for its first year of operations:

Account

Debit

Credit

Accounts payable

$273,000

Accounts receivable

$546,000

Cash

31,200

Cost of goods sold

1,365,000

Interest receivable

875

Interest revenue

1,750

Merchandise inventory

253,500

Notes receivable, due April 10, 2025

35,100

Prepaid insurance

6,240

Sales

3,490,500

Sales returns and allowances

78,000

Short-term investments

39,000

Unearned revenue

19,500

Prepare the journal entry to record the bad debt expense on December 31, 2024, assuming the credit manager estimates that 4% of the accounts receivable will become uncollectible. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. List debit entry before credit entry.)

Date Account Titles

Debit

Credit

Dec. 31 Prepare the current assets section of the balance sheet for Cullumber Industries on December 31, 2024. (List Current Assets in order of liquidity. Enter account name only and do not provide descriptive information.)

CULLUMBER INDUSTRIES

Balance Sheet (Partial)

### Journal Entry for Bad Debt Expense

To calculate the Bad Debt Expense, we need to determine 4% of the Accounts Receivable balance:

\[
\text{Bad Debt Expense} = 4\% \times \$546,000 = 0.04 \times \$546,000 = \$21,840
\]

**Journal Entry on December 31, 2024:**

| Date       | Account Titles        | Debit   | Credit   |
|------------|-----------------------|---------|----------|
| Dec. 31, 2024 | Bad Debt Expense       | $21,840 |          |
|            | Allowance for Doubtful Accounts |         | $21,840  |

This entry records the estimated uncollectible accounts for the period.

### Current Assets Section of Balance Sheet (Partial)

Now, we'll prepare the current assets section of the balance sheet. Current assets are typically listed in order of liquidity.

**CULLUMBER INDUSTRIES**

**Balance Sheet (Partial)**

**As of December 31, 2024**

**Current Assets:**

1. **Cash**: $31,200
2. **Accounts Receivable**: $546,000
   - Less: **Allowance for Doubtful Accounts**: ($21,840)
   - **Net Accounts Receivable**: $524,160
3. **Short-term Investments**: $39,000
4. **Merchandise Inventory**: $253,500
5. **Notes Receivable (due April 10, 2025)**: $35,100
6. **Interest Receivable**: $875
7. **Prepaid Insurance**: $6,240

### Summary of Current Assets:

- **Total Current Assets** = $31,200 (Cash) + $524,160 (Net Accounts Receivable) + $39,000 (Short-term Investments) + $253,500 (Merchandise Inventory) + $35,100 (Notes Receivable) + $875 (Interest Receivable) + $6,240 (Prepaid Insurance)
- **Total Current Assets** = $890,075

This total represents the amount of resources that Cullumber Industries expects to convert into cash or use within one year.

---

Would you like further details or explanations? Here are some related questions you might consider:

1. How is the Allowance for Doubtful Accounts calculated?
2. What impact does Bad Debt Expense have on the financial statements?
3. Why are current assets listed in order of liquidity?
4. What other accounts might be considered current assets?
5. How would the balance sheet change if the bad debt percentage estimate was different?
6. What are some examples of situations where accounts might become uncollectible?
7. How does the Allowance for Doubtful Accounts affect the Accounts Receivable?
8. What is the purpose of short-term investments in the context of current assets?

**Tip:** Understanding the order of liquidity on a balance sheet helps assess a company’s ability to meet its short-term obligations.

Explore the journal entry for bad debt expense and the preparation of the current assets section of the balance sheet for Cullumber Industries as of December 31, 2024. Learn how to calculate bad debt expense and understand its impact on financial statements. Detailed step-by-step solution provided.

Math Problem Statement

Solution

Ask a new question for Free

By Image

Math Problem Analysis

Mathematical Concepts

Formulas

Theorems

Suitable Grade Level

Related Recommendation