Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $151,000 Credit sales, $451,000 Selling and administrative expenses, $111,000 Sales returns and allowances, $31,000 Gross profit, $491,000 Accounts receivable, $120,000 Sales discounts, $15,000 Allowance for doubtful accounts credit balance, $1,300 Flyer prepares an aging of accounts receivable and the result shows that 4% of accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?
Flyer Company has provided the following information prior to any year-end bad debt adjustment: Cash sales, $151,000 Credit sales, $451,000 Selling and administrative expenses, $111,000 Sales returns and allowances, $31,000 Gross profit, $491,000 Accounts receivable, $120,000 Sales discounts, $15,000 Allowance for doubtful accounts credit balance, $1,300 Flyer prepares an aging of accounts receivable and the result shows that 4% of accounts receivable is estimated to be uncollectible. What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?
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?
