The trial balance before adjustment of Risen Company reports the following balan
ID: 2481581 • Letter: T
Question
The trial balance before adjustment of Risen Company reports the following balances: Accounts receivable Debit $100,000 Allowance for doubtful accounts Credit $2,500 Sales (all on credit) Credit $750,000 Sales returns and allowances Debit $40,000 Instructions (a) Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 6% of gross accounts receivable and (2) 1% of net sales. (b) Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $2,500 instead of a credit balance. How will this difference affect the journal entries in part (a)?
Explanation / Answer
(a)
Entries for estimating Bad debts is calculated as under:
(b)
Journal entry will be as follows:
Date Particulars L.F Amount ($) Amount ($) Bad debt expense 3,500 1 Allowance for doubtful accounts 3,500 (For Bad debt created) 2 Bad debt expense 7,100 Allowance for doubtful accounts 7,100 (For Bad debt created)Related Questions
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