Question

During the current year, Sun Electronics, Incorporated, recorded credit sales of $780,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. a. On November 13 of the current year, an account receivable for $380 from a prior year was determined to be uncollectible and was written off. b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year.

Answer 1

Answer and Explanation:

According to the scenario, computation of the given data are as follow:-

Effects on transaction:-

 

Transactions  Assets  Amount($) Stockholder’s equity Amount($)    

a. Accounts receivable ($380)    Bad-debt expense(780,000×2%) ($15,600)    

 Allowance for doubtful accounts  $380      

b. Allowance for doubtful accounts = ($780,000 × 2÷100) = ($15,600)