Question

At December 31, Hawke Company reports the following results for its calendar year. Cash sales $ 1,987,830 Credit sales $ 3,847,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable $ 1,165,641 debit Allowance for doubtful accounts $ 24,060 debit Required: 1. Prepare the adjusting entry to record bad debts under each separate assumption. Bad debts are estimated to be 3% of credit sales. Bad debts are estimated to be 2% of total sales. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible.

Answer 1

	Adjusting entry
I	Date	Account Title	Debit	Credit
		Bad debt expense (3847000*3%)	115,410			Credit sales	3,847,000
		Allowance for doubtful accounts		115,410
II	Date	Account Title	Debit	Credit		Total Sales
		Bad debt expense (5834830*2%)	116,697			Cash sales	1,987,830
		Allowance for doubtful accounts		116,697		Credit sales	3,847,000
							5,834,830
III	Date	Account Title	Debit	Credit
		Bad debt expense (1165641 X 6%+24060)	93,998
		Allowance for doubtful accounts		93,998