Question

At the end of the current year, the accounts receivable account has a debit balance of $932,000 and sales for the year total $10,570,000.

1. The allowance account before adjustment has a debit balance of $12,600. Bad debt expense is estimated at 1/2 of 1% of sales.
2. The allowance account before adjustment has a debit balance of $12,600. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $40,300.
3. The allowance account before adjustment has a credit balance of $6,400. Bad debt expense is estimated at 3/4 of 1% of sales.
4. 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.

a.
b.
c.
d.

Answer 1

WORKING NOTES: 1
	CALCULATION OF ALLOWANCE ACCOUNT ON THE BASIS OF 1/2 of 1% SALES
	Sales	$          10,570,000
	Estimated uncollectable %	1%
	Estimated Amount of 1%	$                105,700
	Estimated uncollectable amount 1/2 of $ 105,700	$                  52,850
	Add:Debit Balance in allowance for doubtfull account	$                  12,600
	Bad Debt Expenses	$                118,300
WORKING NOTES: 2
	Estimated uncollectable amount =	$                  40,300
	Add: Debit Balance in uncollectable amount	$                  12,600
	Bad Debt Expenses	$                  52,900
WORKING NOTES: 3
	Sales	$          10,570,000
	Estimated uncollectable %	1%
	Estimated Amount of 1%	$                105,700
	Estimated uncollectable amount 3/4 of $ 105,700	$                  79,275
	Less :Credit Balance in allowance for doubtfull account	$                     6,400
	Bad Debt Expenses	$                  72,875
WORKING NOTES: 4
	Estimated uncollectable amount =	$                  53,100
	Less :Credit Balance in allowance for doubtfull account	$                     6,400
	Bad Debt Expenses	$                  46,700
SOLUTION : A
Journal Entries
Date	Account Title and explanation	Debit	Credit
---------	Bad Debt Expenses	$                118,300
	Allowance for Doubtful Debts		$                  118,300
	(To record the bad debts expenses)
SOLUTION : B
Journal Entries
Date	Account Title and explanation	Debit	Credit
---------	Bad Debt Expenses	$                  52,900
	Allowance for Doubtful Debts		$                     52,900
	(To record the bad debts expenses)
SOLUTION : C
Journal Entries
Date	Account Title and explanation	Debit	Credit
---------	Bad Debt Expenses	$                  72,875
	Allowance for Doubtful Debts		$                     72,875
	(To record the bad debts expenses)
SOLUTION : D
Journal Entries
Date	Account Title and explanation	Debit	Credit
---------	Bad Debt Expenses	$                  46,700
	Allowance for Doubtful Debts		$                     46,700
	(To record the bad debts expenses)