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6 Sep 2018
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?
Patrina SchowalterLv2
8 Sep 2018