At December 31, 2011, Ethan Company reports the following results for its calend

Question

At December 31, 2011, Ethan Company reports the following results for its calendar year.

Cash sales.... $1,803,750
Credit sales....$3,534,000

In addition, its unadjusted trial balance includes the following items.

Accounts receivable..... $1,070,100 debit
Allowance for doubtful accounts.... $15,750 debit


Prepare the adjusting entry for this company to recongnize bad debts under each of the following independant assumptions.

A: bad debts are estimated to be 2% of credit sales
B: bad debts are estimated to be 1% of total sales
C: An aging analysis estimated that 5% of year-end accounts receivable are uncollectible

Explanation / Answer

B. bad debits are 1% of total sales total sales = 1803750 + 3534000 = 5,337,750 1% = 5,337,750*.01 = 53,377.50 debit: Bad debt expense 53,377.50 credit: allowance for doubtful accounts 53,377.50

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