Dr. Cr.
Accountsreceivable $150,000
Allowance for doubtfulaccounts $ 2,500
Sales (all oncredit) 850,000
Sales returns andallowances 40,000
Instructions
(a) Prepare the entriesfor estimated bad debts assuming that doubtful accounts areestimated to be (1) 6% of gross accounts receivable and (2) 1% ofnet sales.
(b) Assume that all theinformation above is the same, except that the Allowance forDoubtful Accounts has a debit balance of $2,500 instead of a creditbalance. How will this difference affect the journal entries inpart (a)?
(c) What is thetheoretical justification for each of the two allowance methodsused to estimate bad debts?
Dr. Cr.
Accountsreceivable $150,000
Allowance for doubtfulaccounts $ 2,500
Sales (all oncredit) 850,000
Sales returns andallowances 40,000
Instructions
(a) Prepare the entriesfor estimated bad debts assuming that doubtful accounts areestimated to be (1) 6% of gross accounts receivable and (2) 1% ofnet sales.
(b) Assume that all theinformation above is the same, except that the Allowance forDoubtful Accounts has a debit balance of $2,500 instead of a creditbalance. How will this difference affect the journal entries inpart (a)?
(c) What is thetheoretical justification for each of the two allowance methodsused to estimate bad debts?
Related questions
The trial balance before adjustment of Risen Company reports the following balances:
| Dr. | Cr. | |||
| Accounts receivable | $300,000 | |||
| Allowance for doubtful accounts | $5,000 | |||
| Sales (all on credit) | 1,700,000 | |||
| Sales returns and allowances | 80,000 |
nstructions
(a) Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be 6% of gross accounts receivable.
(b) Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $5,000 instead of a credit balance. How will this difference affect the journal entries in part (a)?
(c) what is the theoretical justification for the percentage -of-recievables method used to estimate bad debts?
