What would the journal entry on the following look like?

Question

9/1/20X1 : JPM sold inventory that had a cost $400,000 at its normal 100% markup. All sales are on account. JPM expects to collect 95% of its credit sales.

 

 

Answer 1

Assuming that the bad debt expense is recorded AT THE TIME OF SALE:

If COGS = $400,000 and markup is 100%, then sales are $800,000 on account. If bad debt is recorded at the time of the sale then it should be as follows:

A/R $800,000

Sales Revenue $800,000

COGS $400,000

Inventory $400,000

Bad Debt Exp $40,000

Allow For Doubt- $40,000

ful accounts