[The following information applies to the questions displayed below.] At Decembe

Question

[The following information applies to the questions displayed below.]

At December 31, 2017, Hawke Company reports the following results for its calendar year.

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

Required:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.

a. Bad debts are estimated to be 1.5% of credit sales.

b. Bad debts are estimated to be 1% of total sales.

c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.

Adjusting entries (all dated December 31, 2017).

1a. Bad debts are estimated to be 1.5% of credit sales.

1b. Bad debts are estimated to be 1% of total sales.

1c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a.

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1c.

Explanation / Answer

Rreq 1-a: Bad debts expense Dr. (5682000*1.5%) 85230       Allowance for doubtful accounts 85230 Req 1-b: Bad debts expense Dr. (7587000*1%) 75870      Allowance for doubtful accounts 75870 Req 1-c: Bad debts expense Dr. 80085    Allowance for doubtful accounts 80085 (1270100 *5% +16580) Req 2 Current assets: Accounts receivable (Gross) 1270100 Less: Allowance fr doubtful account 68650 (85230-16580) Accounts receivable (Net) 1201450 Req 3: Current assets: Accounts receivable (Gross) 1270100 Less: Allowance fr doubtful account 63505 Accounts receivable (Net) 1206595

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