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

At December 31, 2017, Hawke Company reports the following results for its calendar year.


Cash sales	$	2,129,230
Credit sales		3,122,000

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


Accounts receivable	$	945,966	debit
Allowance for doubtful accounts		12,520	debit

Problem 9-2A Part 1

Required:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.

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.

Adjusting entries (all dated December 31, 2017).

Problem 9-2A Part 2

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a.

Problem 9-2A Part 3

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1c.

Solutions

Expert Solution

1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.

Date	account and explanation	debit	credit
Dec 31	Bad debt expense (3122000*3%)	93660
	Allowance for doubtful accounts		93660
	(To record adjusting entry)

Date	account and explanation	debit	credit
Dec 31	Bad debt expense (5251230*2%)	105024.60
	Allowance for doubtful accounts		105024.60
	(To record adjusting entry)

Date	account and explanation	debit	credit
Dec 31	Bad debt expense (945966*6%+12520)	69277.96
	Allowance for doubtful accounts		69277.96
	(To record adjusting entry)

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a.

Current assets
Account receivable	945966
Less: Allowance for doubtful accounts (93660-12520)	-81140	864826

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1c

Current assets
Account receivable	945966
Less: Allowance for doubtful accounts	-56757.96	889208.04

ekkarill92 answered 1 year ago

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