Question

At December 31, Hawke Company reports the following results for its calendar year. Problem 9-2A Estimating and reporting bad debts P2 P3 Cash sales......... $1,905,000 Credit sales ...................... $5,682,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable........... $1.270.100 debit Allowance for doubtful accounts ..... $16,580 debit Check Bad Debts Expense (10) $85.230. (10 $80,085 Required 1. Prepare the adjusting entry to record bad debts under each separate assumption. a. Bad debts are estimated to be 1.5% of credit sales. b. Bad debts are estimated to be 1% of total sales. c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible. 2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet given the facts in part la. 3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet given the facts in part lc.

Answer 1

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Hawke Company
Answer 1 a
Calculation of Bad debt accrual
Total credit sales	5,682,000.00	A
Bad debt accrual %	1.5%	B
Bad debt accrual	85,230.00	C=A*B
Bad debt expense for Dec 31
Bad debt accrual	85,230.00	See F
Allowance for doubtful account balance	(16,580.00)	G
Bad debt expense for Dec 31	101,810.00	H=F-G
Adjusting Entry
Account	Debit $	Credit $
Bad debt expense	101,810.00
Allowance for doubtful account		101,810.00
Answer 1 b
Calculation of Bad debt accrual
Total credit sales	5,682,000.00
Total cash sales	1,905,000.00
Total sales	7,587,000.00	A
Bad debt accrual %	1.0%	B
Bad debt accrual	75,870.00	C=A*B
Bad debt expense for Dec 31
Bad debt accrual	75,870.00	See F
Allowance for doubtful account balance	(16,580.00)	G
Bad debt expense for Dec 31	92,450.00	H=F-G
Adjusting Entry
Account	Debit $	Credit $
Bad debt expense	92,450.00
Allowance for doubtful account		92,450.00
Answer 1 c
Calculation of Bad debt accrual
Accounts Receivable	1,270,100.00	A
Bad debt accrual %	5.0%	B
Bad debt accrual	63,505.00	C=A*B
Bad debt expense for Dec 31
Bad debt accrual	63,505.00	See F
Allowance for doubtful account balance	(16,580.00)	G
Bad debt expense for Dec 31	80,085.00	H=F-G
Adjusting Entry
Account	Debit $	Credit $
Bad debt expense	80,085.00
Allowance for doubtful account		80,085.00

Answer 2
Balance Sheet as on Dec 31	Amount $
Accounts Receivable (gross)	1,270,100.00
Less: Allowance for doubtful accounts	101,810.00
Accounts Receivable (net)	1,168,290.00
Answer 3
Balance Sheet as on Dec 31	Amount $
Accounts Receivable (gross)	1,270,100.00
Less: Allowance for doubtful accounts	80,085.00
Accounts Receivable (net)	1,190,015.00

Answer 2