At December 31, 2013, Hawke Company reports the following results for its calend

Question

At December 31, 2013, Hawke Company reports the following results for its calendar-year. Cash sales $ 2,054,960 Credit sales 3,878,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable $ 1,175,034 debit Allowance for doubtful accounts 18,190 debit 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 3% of credit sales.

b. Bad debts are estimated to be 2% of total sales.

c. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible. Adjusting entries (all dated December 31, 2013).

Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2013, balance sheet given the facts in part 1a.

Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2013, balance sheet given the facts in part 1c.

Explanation / Answer

Part 1)

The adjusting entries for a, b and c have been provided as follows:

___________

Part 2)

Balance Sheet:

___________

Part 3)

Balance Sheet:

General Journal Debit Credit a Bad Debt Expense (3,878,000*3%) $116,340 Allowance for Doubtful Accounts $116,340 b Bad Debt Expense ((3,878,000+2,054,960)*2%) $118,659 Allowance for Doubtful Accounts $118,659 c Bad Debt Expense (1,175,034*6% + 18,190) $88,692 Allowance for Doubtful Accounts $88,692

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