Question

Providing for Doubtful Accounts At the end of the current year, the accounts receivable account has a debit balance of $992,000 and sales for the year total $11,240,000. The allowance account before adjustment has a credit balance of $13,400. Bad debt expense is estimated at 1/4 of 1% of sales. The allowance account before adjustment has a credit balance of $13,400. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $42,900. The allowance account before adjustment has a debit balance of $5,300. Bad debt expense is estimated at 1/2 of 1% of sales. The allowance account before adjustment has a debit balance of $5,300. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $44,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above. a. $ b. $ c. $ d. $

Answer 1

a) Bad debt expense is estimated at 1/4 of 1% of sales. The allowance account before adjustment has a credit balance of $13,400.

Dr Bad debt expense ($28,100 - $13,400) 14,700

Cr Allowance for doubtful accounts 14,700

b) The allowance account before adjustment has a debit balance of $5,300.

Dr Bad debt expense ($28,100 - $5,300) 22,800

Cr Allowance for doubtful accounts 22,800

c) Bad debt expense is estimated at 1/2 of 1% of sales.

Dr Bad debt expense ($56,200 - $13,400) 42,800

Cr Allowance for doubtful accounts 42,800

d) An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $44,000.

Dr Bad debt expense ($44,000 - $13,400) 30,600

Cr Allowance for doubtful accounts 30,600

Step-by-step explanation:

accounts receivable $992,000

total sales for the year $11,240,000

allowance for doubtful accounts $13,400

total estimated bad debt = 0.25% x $11,240,000 = $28,100

total estimated bad debt = 0.5% x $11,240,000 = $56,200