Question

At December 31, Hawke Company reports the following results for its calendar year. Cash sales $ 1,207,450 Credit sales $ 2,804,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable $ 849,612 debit Allowance for doubtful accounts $ 15,110 debit

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

1. Bad debts are estimated to be 2% of credit sales.
2. Bad debts are estimated to be 1% of total sales.
3. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.

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

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet given the facts in part 1a.

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet given the facts in part 1c. (Do not round intermediate calculations.)

Answer 1

When bad debts is 2% of credit sales:

Account	Debit	Credit
Bad debt expense	56,080
Allownace for doubtful accounts	56,080
Balance sheet
Current assets
Accounts receivable	8,49,612
Less: allowance for doubt accts	56,080
Accounts receivable, net		7,93,532

When bad debts is 1% of total sales:

Account	Debit	Credit
Bad debt expense	40,115
Allownace for doubtful accounts	40,115
Balance sheet
Current assets
Accounts receivable	8,49,612
Less: allowance for doubt accts	40,115
Accounts receivable, net		8,09,498

When allowance balance is 5% of accounts receivable.

Particulars	Amount
Required balance	42,480.60
Less: Allowance balance	15,110.00
Bad debt expense	27,370.60
Account	Debit	Credit
Bad debt expense	27,371
Allownace for doubtful accounts	27,371
Balance sheet
Current assets
Accounts receivable	8,49,612
Less: allowance for doubt accts	27,371
Accounts receivable, net		8,22,241

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