Question

At December 31, Folgey's 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 debit

  

a. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 1.5% of credit sales.

b. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 0.5% of total sales.

c. Prepare the adjusting entry to record Bad Debts Expense assuming uncollectibles are estimated to be 6% of year-end accounts receivable.