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Problem 9-2A Estimating and reporting bad debts LO P2, P3

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At December 31, Hawke Company reports the following results for its calendar year.

Cash sales	$	1,777,560
Credit sales	$	2,989,000

In addition, its unadjusted trial balance includes the following items.

Accounts receivable	$	905,667	debit
Allowance for doubtful accounts	$	11,710	debit

Problem 9-2A Part 1

Required:
1. Prepare the adjusting entry to record bad debts under each separate assumption.

1. Bad debts are estimated to be 3% of credit sales.
2. Bad debts are estimated to be 2% of total sales.
3. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible.

Adjusting entries (all dated December 31). (Do not round intermediate calculations.)

Answer 1

Ans. 1	Date	Particulars	Debit	Credit
	31-Dec	Bad debt expense	$89,670
		Allowance for uncollectible accounts		$89,670
		(to record bad debts expense)
	*Bad debts expense =   Credit sales * 3%
		$2,989,000 * 3%
		$89,670
Ans. 2	Date	Particulars	Debit	Credit
	31-Dec	Bad debt expense	$95,331.20
		Allowance for uncollectible accounts		$95,331.20
		(to record bad debts expense)
	*Bad debts expense =   (Cash sales + Credit sales) * 2%
		($1,777,560 + $2,989,000) * 2%
		$4,766,560 * 2%
		$95,331.20
Ans. 3	Date	Particulars	Debit	Credit
	31-Dec	Bad debt expense	$66,050.02
		Allowance for uncollectible accounts		$66,050.02
		(to record bad debts expense)
	*Bad debts expense =   (Accounts receivable * 6%) + Un adjusted debit balance of allowance account
		($905,667 * 6%) + $11,710
		$54,340.02 + $11,710
		$66,050.02
Ans. 1	Date	Particulars	Debit	Credit
	31-Dec	Bad debt expense	$89,670
		Allowance for uncollectible accounts		$89,670
		(to record bad debts expense)
	*Bad debts expense =   Credit sales * 3%
		$2,989,000 * 3%
		$89,670
Ans. 2	Date	Particulars	Debit	Credit
	31-Dec	Bad debt expense	$95,331.20
		Allowance for uncollectible accounts		$95,331.20
		(to record bad debts expense)
	*Bad debts expense =   (Cash sales + Credit sales) * 2%
		($1,777,560 + $2,989,000) * 2%
		$4,766,560 * 2%
		$95,331.20
Ans. 3	Date	Particulars	Debit	Credit
	31-Dec	Bad debt expense	$66,050.02
		Allowance for uncollectible accounts		$66,050.02
		(to record bad debts expense)
	*Bad debts expense =   (Accounts receivable * 6%) + Un adjusted debit balance of allowance account
		($905,667 * 6%) + $11,710
		$54,340.02 + $11,710
		$66,050.02