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Providing for Doubtful Accounts At the end of the current year, the accounts rec

ID: 2403278 • Letter: P

Question

Providing for Doubtful Accounts At the end of the current year, the accounts receivable account has a debit balance of $1,236,000 and sales for the year total $14,010,000 a. The allowance account before adjustment has a credit balance of $16,700. Bad debt expense is estimated at 1/4 of 1% of sales. b. The allowance account before adjustment has a credit balance of $16,700. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $53,400. C. The allowance account before adjustment has a debit balance of $9,100. Bad debt expense is estimated at 1/2 of 1% of sales. d. The allowance account before adjustment has a debit balance of $9,100. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $75,500. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above. a. C. d.

Explanation / Answer

A.) The allowance account before adjustment has a credit balance of $16,700. Bad debt expense is estimated at 1/4 of 1% of sales.
$1,40,10,000 x 1% x 1/4 = $35,025 -$16,700 = $18,325 adjustment

B.) The allowance account before adjustment has a credit balance of $16,700. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $53,400.

$53,400- $16,700= $36,700 adjustment

C.) The allowance account before adjustment has a debit balance of $9,100. Bad debt expense is estimated at 1/2 of 1% of sales.
$1,40,10,000 x 1% x 1/2 = $70,050 +$9,100 = $79,150 adjustment

D.) The allowance account before adjustment has a debit balance of $9,100. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $75,500.
Since there is a debit balance, the adjustment would be $75,500 + $9,100=$ 84,600

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