Question

Everekse 811 Estimating bad debt expense-percentage of sales L03 CHECK FIGURE: Accounts receivable ineo - $232,700 Selected unadjusted account balances at December 31, 2020, are shown below for Democe Servicing Credit Account Accounts receivable $70.000 Allowance for doubtful accounts... Sales (all on credit) Sales discounts 8.000 $ 1.100 480,000 Required a. Demron estimates that 1.5% of net credit sales will prove to be uncollectible. Prepare the adjusting entry required on December 31, 2020, to estimate uncollectible receivables 1. During 2021, credit sales were $620,000 (cost of sales $405,500% sales discounts of $12,000 were taken when accounts receivable of $400.000 were collected: and accounts written off during the year totalled $10.000. Prepare the entries for these transactions c. Record the adjusting entry required on December 31, 2021 to estimate uncollectible receivables, assuming it is based on 1.5% of net credit sales 4. Show how accounts receivable would appear on the December 31, 2021. balance sheet Analysis Component: Comment on the advantages and disadvantages of using the income statement approach for estimating collectibles

Answer 1

Solution :- P. nol a) Adjusting entry on December 31, 2020 for estimated uncollectible receivables Date Account Titles and description Debit Credit Bad Debts expenses Dr. $7,080 060C TE $7,080 To Allowances for Bad debts al Concellectible receivable estinakd @ 15% of net Credit sales) Net Credit sales - Total sales - Sales Discounts $ 480,000 – 8,000 $ 472,000 Estimated uncollectible receivable = 1.5% * $472,000 $ 7,080

P.2 b Entries for 2001 Date Debet Credit Account Titles & Description Accounts Receivables Dr. during goal $ 608,000 Sales Discount $ 19,000 Sales Discount Dr 620,000 To sales Revenue ale Centry for Gredit sales during the year and sales discounts) Cash ale To Accounts Receivable ale (Cach Collected from account receivable) $ 440,000 $440,000 Allowance for Bad delts Ak Dr. $10,000 $ 10,000 TO Accounts Receivable Ale (Accounts receivable written off during the year)

P.3 Dec 31, 2091 for estimated c) Adjusting entry on Unceledikde necefvables nate Account Titles & Description Debit Credit Bad debts Expenses Dr. $9,120 31, Joal TO Allowance for Bad debts Alc $9,120 Concollectible receivable exi -mated @ 1.5% of net Credit sales) Net Gredit Sales Total sales sales discounts $ 690,000 12,000 $ 608,000 Estimated uncollectible receivable 1.5% + $ 608,000 $ 9,120

P.4 d) Account Receivables on balance sheet Dec 31, 2021 liabilities Amount Assets Amount Accounts Receivables $398,000 lewi Allowance for uncollectable Alc $ 7,300) Net Account Receivables | $920, too adjusted Balance of Accounts receivables on 31 dec 2021 opening balance + Net Credit Sales during the year - amount collected amount written off $ 70,000 + 608000 – 440,000 – 10,000 $ 398,000

P.S Accounts Balance of Allowance of uncollectable receivables on 31 dec 2011 opening Balance + Allowance during the written off t geam 3020- amount Allowance during the year goal $ 1,100 + 7,080 – 10,000+ 9,120 3 $ 7,300 please give them sup. me