Question

In: Accounting

At the end of the current year, the accounts receivable account has a debit balance of...

At the end of the current year, the accounts receivable account has a debit balance of $1,095,000 and sales for the year total $12,420,000.

  1. The allowance account before adjustment has a debit balance of $14,800. Bad debt expense is estimated at 3/4 of 1% of sales.
  2. The allowance account before adjustment has a debit balance of $14,800. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $47,400.
  3. The allowance account before adjustment has a credit balance of $5,300. Bad debt expense is estimated at 1/4 of 1% of sales.
  4. The allowance account before adjustment has a credit balance of $5,300. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $44,000.

Solutions

Expert Solution

Determination of the amount of the adjustment entry to provide for doubtful accounts:

A) Amount of the adjustment entry to be provided for doubtful accounts:

It is equal to the estimated bad debt expense

= (Sales × 1%) × (1/4)

= ($12420000×1%) × (1/4)

= $124200×(1/4)

= $31050

B) Amount of adjustment entry to be provided for doubtful accounts:

It is equal to the estimated amount of doubtful accounts in addition to the the debit balance amount in allowance account.

= $47400+$14800

= $62200

*$14800 has been added since the allowance account has debit balance

C) Amount of the adjustment entry to be provided for doubtful accounts:

It is equal to the estimated bad debts expense

​​​​​= (Sales × 1%) × (3/4)

= ($12420000×1%)×(3/4)

= $124200×(3/4)

= $93150

D) Amount of the adjustment entry to be provided for doubtful accounts:

It is equal to the estimated amount of doubtful accounts after deducting the credit balance amount in allowance account

= $60600 - $7300

= $53300

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ekkarill92 answered 2 years ago
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