On December 31, Folgeys Coffee Company reports the following results for its calendar year. Cash sales $ 900,000 Credit sales 300,000 Its year-end unadjusted trial balance includes the following items. Accounts receivable $ 125,000 debit Allowance for doubtful accounts 5,000 debits Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (a) 3% of credit sales, (b) 1% of total sales and (c) 6% of year-end accounts receivable.
On December 31, Folgeys Coffee Company reports the following results for its calendar year. Cash sales $ 900,000 Credit sales 300,000 Its year-end unadjusted trial balance includes the following items. Accounts receivable $ 125,000 debit Allowance for doubtful accounts 5,000 debits Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (a) 3% of credit sales, (b) 1% of total sales and (c) 6% of year-end accounts receivable.
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Problem 9-2A Estimating and reporting bad debts LO P2, P3
[The following information applies to the questions displayed below.]
At December 31, 2017, Hawke Company reports the following results for its calendar year.
| Cash sales | $ | 1,305,010 | |
| Credit sales | 3,261,000 | ||
In addition, its unadjusted trial balance includes the following items.
| Accounts receivable | $ | 988,083 | debit |
| Allowance for doubtful accounts | 16,930 | debit | |
Problem 9-2A Part 1
Required:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
a. Bad debts are estimated to be 2% of credit sales.
b. Bad debts are estimated to be 1% of total sales.
c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
Adjusting entries (all dated December 31, 2017).
Problem 9-2A Part 2
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a.
Problem 9-2A Part 3
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1c.
