Question

Providing for Doubtful Accounts At the end of the current year, the accounts receivable account has a debit balance of $1,110,000 and sales for the year total $12,590,000. The allowance account before adjustment has a debit balance of $15,000. Bad debt expense is estimated at 3/4 of 1% of sales. The allowance account before adjustment has a debit balance of $15,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $48,000. The allowance account before adjustment has a credit balance of $8,800. Bad debt expense is estimated at 1/2 of 1% of sales. The allowance account before adjustment has a credit balance of $8,800. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $73,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.

Answer 1

Answer:

(A) 94,425

(B) 63,000

(C) 62,950

(D) 64,200

Explanation:

(A)

bad debt expense 0.75% of sales 12,590,000 = 94,425

It is calculating the bad debt exense not the allowance, so we adjust for the full amount

(B)

estimated doubtful account 48,000

+ allowance of doubtful account  15,000 debit

adjusting amount 63,000

(C)

bad debt expense 0.50% of sales 12,590,000 = 62,950

It is calculating the bad debt exense not the allowance, so we adjust for the full amount

(D)

estimated doubtful account 73,000

- allowance of doubtful account  8,800 credit

adjusting amount 64,200