Question

Acompany rports the following account balances on December 31, before year-end adjusting journal entries have been prepared: Accounts Receivable Allowance for Doubtful Accounts Sales $3,000,000 (Dr.) 18,000 (Dr.) $40,000,000 (Cr.) Answer the following independent questions The company uses the Percent of Sales method to estimate bad debts. The company estimates that .5% (.005) of sales will be uncollectible. Prepare the entry to record the estimate of bad debts a. b. The company uses an analysis of accounts receivable to estimate bad debts. Management estimates that $198,000 of accounts receivable will be uncollectible. Prepare the entry to record the estimate of bad debts.

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Answer #1
a
Bad debts expense 200000 =40000000*0.5%
         Allowance for doubtful accounts 200000
b
Bad debts expense 216000 =198000+18000
         Allowance for doubtful accounts 216000
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