At December 31 2017 Hawke Company reports the following resu

At December 31. 2017. Hawke Company reports the following results for its calendar year Cash sales Credit sales $1,644,828 3,686,08e In addition, its unadjusted trial balance includes the following items. Accounts receivable Allowance for doubtful accounts $1,116,858 debit 17,290 debit Required: 1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions b. c, Bad debts are estimated to be 3% of credit sales. Bad debts are estimated to be 2% of total sales. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible. djusting entries (all dated December 31, 2017) KPrev2 3 4 of 4 Next> arch

Solution

Solution 2:

Estimated bad debts = 3% of credit sales = $3,686,000 * 3% = $110,580

Bad debts expense to be recorded = $110,580

Ending balance of allowance for doubtful accounts = $110,580 - $17,290 = $93,290

Solution 3:

Required balance of allowance for doubtful accounts = $1,116,858 * 6% = $67,011.48

Balance in allowance for doubtful accounts = $17,290 Debit

Bad debts expense to be recorded = $67,011.48 + $17,290 = $84,301.48

Balance Sheet (Partial) - Hawke Company
As on December 31, 2017
Particulars		Amount
Accounts Receivables (Gross)	$1,116,858.00
Less: Allowance for doubtful accounts	$93,290.00
Accounts receivables (Net)		$1,023,568.00