Use the following to answer questions 1-2: A trial balance before adjustments in

Question

Use the following to answer questions 1-2: A trial balance before adjustments included the following: ales ales returns and allowanee ccounts receivable llowance for doubtful account s850,00 If the estimate of uncollectibles is made by taking 10% of gross account receivables, the of the 448 0,120. 080 If the estimate of uncollectibles is made by taking 2% of net sales, the am ount of the Mobile sells smartphones and prepaid phone and data service plans. On October 1, Sooner Mobile sold a package deal including a phone and a 3 month prepaid service for a bundle price of S500. If sold separately, the phone sells for $420 and the 3 prepaid service plan sells for $180. How much revenue does Sooner Mobile for the month ended October 31st? 500 a customer purchases merchandise inventory from a business organization, she y be given a discount which is designed to induce prompt payment. Such a discount is alled ain nhancement discount ade discount ash discount inal discount . Gross billings for merchandise sold by Lang Company to its customers last year to $12,720,000; sales returns were S370,000, sales discounts were $175,000, bad debt e was $140,000, Net sales last year for Lang C 12,035,000 12.720,000

Explanation / Answer

Solution 1:

As estimate is made by taking 10% of gross receivables which is

86,000*10% = 8,600

Allowance for doubtful accounts credit balance required of 8,600

Now Allowance for doubtful accounts is having a credit balance of 1,520

Adjustment required 6,480

So correct answer is $7,080 which is D.

Solution 2:

As estimate is % of net sales

So estimate will be (850,000-28,000)2% = 16,440

So adjustment will be $16,440 which is C.

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