Answer:
Please find the detailed answer in the explanation section.
Explanation:
A. 4% of credit sales
Bad Debts Expense is 4% of $301,000
0.04 x $301,000
=$12,040
Adjusting entry
Dec. 31
Dr Bad debt expense $12,040
Cr Allowance for Doubtful allowance $12,040.
B. 2% of total sales
Total sales = cash sales + credit sales
$ 901,000 + $ 301,000
=$1,202,000
Bad Debts Expense is 2% of 1,202,000
0.02x $1,202,000
=$24,040
Adjusting entry
Dec. 31
Dr Bad debt expense $24,040
Cr Allowance for Doubtful allowance $24,040.
C. 7% of year-end accounts receivable.
Unadjusted balance is $5,100
Estimated balance = $8,820(7% of $126,000)
Adjusted balance is $13,920($5,100 + $8,820)
Adjusting entry
Dec. 31
Dr Bad debt expense $8,820
Cr Allowance for Doubtful allowance $8,820
