Question

Question 1. The following information is from the 2017 records of Robin Antique Shop: (10 points) $44,000 (debit) Accounts receivable, December 31, 2017 Allowance for Bad Debts, December 31, 2017 prior to adjustment Net credit sales for 2017 Accounts written off as uncollectible during 2017 Cash sales during 2017 1.100 (debit) 176,000 11,000 27,000 Bad debts expense is estimated by the percent-of-sales method. Management estimates that 5% of net credit sales will be uncollectible. The ending balance of the Allowance for Bad Debts account after adjustment will be

Answer 1

Possible bad debts expense as 5% of credit sales = 176000 * 5/100 =8,800

Balance as on 31 Dec 2017, after writing off of uncollectible accounts is $ 1,100.00 (debit)

The allowance for doubtful debts is to have a credit balance , so to create an allowance for doubtful debts credit balance of $ 8,800 the total adjustment needed is $8,800 + $1,100 = $9,900.00