Question

At December 31, Folgeys Coffee Company reports the following results for its calendar year. Cash sales $ 914,000 Credit sales 314,000 Its year-end unadjusted trial balance includes the following items. Accounts receivable $ 139,000 debit Allowance for doubtful accounts 6,400 debit Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (1) 5% of credit sales, (2) 3% of total sales and (3) 8% of year-end accounts receivable.

Answer 1

a.

Date Account Title Debit Credit

Dec, 31 Bad debt expense $15,700

Allowance for doubtful expense account $15,700

Working

= 5% * 314,000

= $15,700

b.

Date Account Title Debit Credit

Dec, 31 Bad debt expense $‭36,840‬

Allowance for doubtful expense account $‭36,840‬

Working

= 3% * (Cash sales + Credit sales)

= 3% * (914,000 + 314,000)

= $‭36,840‬

c.

Date Account Title Debit Credit

Dec, 31 Bad debt expense $‭‭17,520

Allowance for doubtful expense account $‭‭17,520

Working

= (8% * Year end accounts receivable) + Debit balance for Allowance for doubtful account

= (8% * 139,000) + 6,400

= $‭17,520‬