Assume that Simple Co. had credit sales of $250,000 and cost of goods sold of $150,000 for the period. It estimates that 1 perce
nt of credit sales in uncollectible accounts when it uses the percentage of credit sales method and it estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $3,000 when it uses the aging method. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $250. Prepare the journal entry to record the end-of-period adjustment for bad debts under the (a) percentage of credit sales method and (b) aging of accounts receivable method. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 1. Assume Simple Co. had credit sales of $250,000 and cost of goods sold of $150,000 for the period. Simple uses the percentage of credit sales method and estimates that 1 percent of credit sales would result in uncollectible accounts. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $250. Record the transaction. 2. Assume that Simple Co. had credit sales of $250,000 and cost of goods sold of $150,000 for the period. Simple uses the aging method and estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $3,000. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $250. Record the transaction.
Dane and the other stockholders will lose their investments but nothing else. Because Dane and others are stockholders in this company, they will lose the money that they had invested in the company and they will no longer receive any dividend from the company again because the company has gone bankrupt. Dane and others are not liable for other debts that had been acquired by the company.
The accrual basis of accounting refers to the accounting method where by revenues are recognized on the profit and loss statement when they are realized and not when the money is received.