At the end of the current year the accounts receivable accou

At the end of the current year, the accounts receivable account has a debit balance of $1,236,000 and sales for the year total $14,010,000. a. The allowance account before adjustment has a credit balance of $16,700. Bad debt expense is estimated at 1/4 of 1% of sales. b. The allowance account before adjustment has a credit balance of $16,700. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $53,400 c. The allowance account before adjustment has a debit balance of $9,100. Bad debt expense is estimated at 1/2 of 1% of sales. d. The allowance account before adjustment has a debit balance of $9,100. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $75,500. 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. 84,600

Solution

Case-a: Credit sales 14010000 Bad debt expense 0.50% Amount of Adjusting entry required: 14010,000*0.50% = $ 70050 Case-b: Estimated required balance of Allowance 53400 Less: Existing balance of Allowance -16700 Amount of Adjusting entry required: 36700 Case-c: Credit sales 14010000 Bad debt expense 0.50% Amount of Adjusting entry required: 14010,000*0.50% = $ 70050 Case-d: Estimated required balance of Allowance 75500 Add: Existing Debit balance of Alowance 9100 Amount of Adjusting entry required: 84600