QS 9-3- Percent of accounts receivable method Darius Company year end unadjusted

Question

QS 9-3- Percent of accounts receivable method

Darius Company year end unadjusted trial balance shows accounts receivable of $95,000, allowance for doubtful accounts of $550 (credit), and sales of $35,000. Uncollectibles are estimated to be 1.5% of accounts receivable.

1- Prepare the December 31 year-end adjusting entry for uncollectibles.
2- What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of $150?

QS 9-4- Percent of sales method

Assume the same facts as in QS 9-3, except that Darius estimates uncollectibles as 0.5% of sales. Prepare the December 31 year-end adjusting entry for uncollectibles.

Explanation / Answer

95,000*.015= 1,425. DR Bad debt expense 875 CR Allowance for doubtful accounts 875 DR Bad debt expense 1,575 CR Allowance for doubtful accounts 1,575 35,000*.005= 175 DR Allowance for doubtful accounts 375 CR Bad debt expense 375 (I think most companies just wouldn't make an entry here and keep the reserve conservative).

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