At the end of the current year, the accounts receivable account has a debit balance of $999,000 and sales for the year total $11,330,000. The allowance account before adjustment has a debit balance of $13,500. Bad debt expense is estimated at 1/4 of 1% of sales. The allowance account before adjustment has a debit balance of $13,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $43,200. The allowance account before adjustment has a credit balance of $6,400. Bad debt expense is estimated at 1/2 of 1% of sales. The allowance account before adjustment has a credit balance of $6,400. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $53,100. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.

Question

Gwendolyn Benson

Business

30 December, 10:52

At the end of the current year, the accounts receivable account has a debit balance of $999,000 and sales for the year total $11,330,000. The allowance account before adjustment has a debit balance of $13,500. Bad debt expense is estimated at 1/4 of 1% of sales. The allowance account before adjustment has a debit balance of $13,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $43,200. The allowance account before adjustment has a credit balance of $6,400. Bad debt expense is estimated at 1/2 of 1% of sales. The allowance account before adjustment has a credit balance of $6,400. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $53,100. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.

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Answers (1)

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Madeleine Kane · Answer 1

A.$28,325

B.$56,700

C.$56,650

D.$46,700

Explanation:

A. Record adjusting entry for bad debts on estimated percentage of sales as shown below:

Dr bad debt expenses$11,330,000 * 1% * (1/4) $28,325

Cr Allowance for doubtful accounts $28,325

B. Record adjusting entry for doubtful accounts based on aging of accounts as shown below:

Dr Bad debt expense ($43,200+$13,500) $56,700

Cr Allowance for doubtful accounts $56,700

C. Record adjusting entry for bad debts on estimated at 1/2 of 1% of sales.

Dr bad debt expenses$11,330,000 * 1% * (1/2) $56,650

Cr Allowance for doubtful accounts $56,650

D. Dr Bad debt expense ($53,100 - $6,400) $46,700

Cr Allowance for doubtful accounts $46,700