Question

Prepare the adjusting entry to record bad debts under each separate assumption. Bad debts are estimated to be 1.5% of credit sales. Bad debts are estimated to be 1% of total sales. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible. Adjusting entries (all dated December 31).

Answer 1

Answer:

A. Dr Bad debts expense 85,230

Cr Allowance for Doubtful accounts 85,230

B. Dr Bad debts expense 75,870

Cr Allowance for Doubtful accounts 75,870

C.,Dr Bad debts expense 80,085

Cr Allowance for Doubtful accounts 80,085

Explanation:

Preparation of the adjusting entry to record bad debts under each separate assumption

A. Dr Bad debts expense 85,230

Cr Allowance for Doubtful accounts 85,230

(5,682,000*1.5%)

B. Dr Bad debts expense 75,870

Cr Allowance for Doubtful accounts 75,870

[(1,905,000+5,682,000)*1%]

C.Dr Bad debts expense 80,085

Cr Allowance for Doubtful accounts 80,085

[(1,270,100*5%)+16,580]