IR. Credit Losses Based on Credit Sales Highland Company uses the allowance meth

Question

IR. Credit Losses Based on Credit Sales Highland Company uses the allowance method of handling LO2 credit losses. It estimetes losses at three percent of credit sales, which were $1,400,000 during the year. On December 31, the Accounts Receivable balance was $280,000, and the Allowance for Doubt a cro a. Prepare the adjusting entry to record credit losses for the year b. Show how the Accounts Receivable account and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet.

Explanation / Answer

a)

b)

Adjusted balance of Alliowance for doubtful account = 42000+1800= 43800

No. Account Debit credit a Bad debt expxense 42000 Allowance for doubtful account 42000 [being estimated uncollectible balance recorded 1,400,000*.03]

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