Question

At December 31, Folgeys Coffee Company reports the following results for its calendar year. Cash sales $ 908,000 Credit sales 308,000 Its year-end unadjusted trial balance includes the following items. Accounts receivable $ 133,000 debit Allowance for doubtful accounts 5,800 debit Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (1) 3% of credit sales, (2) 1% of total sales and (3) 6% of year-end accounts receivable.

Answer 1

Answer:

1. Dr Bad debts expense $9,240

C Allowance for Doubtful Accounts $9,240

2. Dr Bad debts expense $12,160

Cr Allowance for Doubtful Accounts $12,160

3. Dr Bad debts expense $13,780

Cr Allowance for Doubtful Accounts $13,780

Explanation:

Preparation of the adjusting entry to record bad debts expense assuming uncollectibles

1. Dr Bad debts expense $9,240

C Allowance for Doubtful Accounts $9,240

(308,000*3%)

2. Dr Bad debts expense $12,160

Cr Allowance for Doubtful Accounts $12,160

[(908,000+308,000)*1%]

3. Dr Bad debts expense $13,780

Cr Allowance for Doubtful Accounts $13,780

[($ 133,000*6%) + 5,800]