Providing for Doubtful Accounts
At the end of the current year, the accounts receivable account has a debit balance of $1,835,000 and sales for the year total $25,690,000
a. The allowance account before adjustment has a debit balance of $12,500. Bad debt expense is estimated at 1/2 of 1% of sales.
b. The allowance account before adjustment has a debit balance of $12,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $162,000.
c. The allowance account before adjustment has a credit balance of $26,810. Bad debt expense is estimated at 3/4 of 1% of sales.
d. The allowance account before adjustment has a credit balance of $26,810. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $171,200.
Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.
Adjusting entry amount
a) Bad debt expense = 25690000*1%*1/2 = 128450
b) Bad debt expense = 162000+12500 = 174500
c) Bad debt expense = 25690000*1%*3/4 = 192675
d) Bad debt expense = 171200-26810 = 144390
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