Question

Providing for Doubtful Accounts At the end of the current year, the accounts receivable account has a debit balance of $962,000 and sales for the year total $10,910,000. The allowance account before adjustment has a credit balance of $13,000. Bad debt expense is estimated at 3/4 of 1% of sales. The allowance account before adjustment has a credit balance of $13,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $41,600. The allowance account before adjustment has a debit balance of $9,000. Bad debt expense is estimated at 1/4 of 1% of sales. The allowance account before adjustment has a debit balance of $9,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $74,700. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.

Answer 1

Answer:

Providing for Doubtful Accounts

The amount of the adjusting entry to provide for doubtful accounts are:

a) = $68,825

b) = $28,600

c) = $36,275

d) = $83,700

Explanation:

a) Data and Calculations:

Accounts receivable balance = $962,000

Sales for the year = $10,910,000

Allowance account before adjustment = $13,000 (credit)

Estimated Bad Debt Expense = 3/4 of 1% of Sales

= 3/4 * 1% * $10,910,000

= $81,825

Bad Debt Expense = $68,825 ($81,825 - $13,000)

b) Allowance account before adjustment = $13,000 (credit)

Estimated doubtful accounts = $41,600

Bad Debts Expense = $28,600 ($41,600 - $13,000)

c) Allowance account before adjustment = $9,000 (debit)

Estimated Bad Debt Expense = 1/4 of 1% of Sales

= 1/4 * 1% * $10,910,000

= $27,275

Bad Debt Expense = $36,275 ($27,275 + $9,000)

d) Allowance account before adjustment = $9,000 (debit)

Estimated doubtful accounts = $74,700

Bad Debts Expense = $83,700 ($74,700 + $9,000)

The adjusting entry is:

Debit Bad Debts Expense

Credit Allowance for Doubtful Accounts

With the amount of the adjusting entry in each case