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JulijaS [17]
3 years ago
7

At the end of the current year, the accounts receivable account has a debit balance of $2,950,000 and sales for the year total $

27,400,000. The allowance account before adjustment has a debit balance of $9,500. Bad debt expense is estimated at 3/4 of 1% of sales. The allowance account before adjustment has a debit balance of $9,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $188,000. The allowance account before adjustment has a credit balance of $31,400. Bad debt expense is estimated at 1/2 of 1% of sales. The allowance account before adjustment has a credit balance of $31,400. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $175,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above
Business
1 answer:
DanielleElmas [232]3 years ago
8 0

Answer:

The treatments and adjusting entry balances are given for each case.

Explanation:

1) Sales               $27,400,000

Accounts receivable account                   $2,950,000

The allowance account before adjustment has a debit balance of $9,500

Bad debt expense is estimated at 3/4 of 1% of sales= 274000 *3/4= $205500

Treatment for a :

Un adjusted Balance = $ 9500 debit

Bad Debts Expense- $ 205500 Cr

Required Adjustment = $  215000

<em><u>End of period adjustment entry </u></em>

Bad Debts Expense   $215000 Dr

Allowance for Doubtful Accounts $ 215000 Cr.

Treatment for b :

Un adjusted Balance = $ 9500 debit

Estimated Balance - $ 188,000 credit

Required Adjustment = $  197,500

<u><em>End of period adjustment entry </em></u>

Bad Debts Expense   $ 197500 Dr

Allowance for Doubtful Accounts $ 197500 Cr.

Treatment for c :

Un adjusted Balance = $ 31,400 Cr

Estimated Balance - $ 137000 (274000/2) Cr

Required Adjustment = $  105600

<u><em>End of period adjustment entry </em></u>

Bad Debts Expense   $ 105600 Dr

Allowance for Doubtful Accounts $ 105,600 Cr.

Treatment for d:

Un adjusted Balance = $ 31,400 Cr

Estimated Balance - $ 175000 Cr

Required Adjustment = $  143,600

<u><em>End of period adjustment entry </em></u>

Bad Debts Expense   $ 143,600 Dr

Allowance for Doubtful Accounts $ 143,600 Cr.

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