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2 April, 11:52

At the end of the current year, the accounts receivable account has a debit balance of $2,950,000 and sales for the year total $27,400,000. The allowance account before adjustment has a debit balance of $9,500. Bad debt expense is estimated at 3/4 of 1% of sales. The allowance account before adjustment has a debit balance of $9,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $188,000. The allowance account before adjustment has a credit balance of $31,400. Bad debt expense is estimated at 1/2 of 1% of sales. The allowance account before adjustment has a credit balance of $31,400. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $175,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above

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  1. 2 April, 13:14
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    The treatments and adjusting entry balances are given for each case.

    Explanation:

    1) Sales $27,400,000

    Accounts receivable account $2,950,000

    The allowance account before adjustment has a debit balance of $9,500

    Bad debt expense is estimated at 3/4 of 1% of sales = 274000 * 3/4 = $205500

    Treatment for a:

    Un adjusted Balance = $ 9500 debit

    Bad Debts Expense - $ 205500 Cr

    Required Adjustment = $ 215000

    End of period adjustment entry

    Bad Debts Expense $215000 Dr

    Allowance for Doubtful Accounts $ 215000 Cr.

    Treatment for b:

    Un adjusted Balance = $ 9500 debit

    Estimated Balance - $ 188,000 credit

    Required Adjustment = $ 197,500

    End of period adjustment entry

    Bad Debts Expense $ 197500 Dr

    Allowance for Doubtful Accounts $ 197500 Cr.

    Treatment for c:

    Un adjusted Balance = $ 31,400 Cr

    Estimated Balance - $ 137000 (274000/2) Cr

    Required Adjustment = $ 105600

    End of period adjustment entry

    Bad Debts Expense $ 105600 Dr

    Allowance for Doubtful Accounts $ 105,600 Cr.

    Treatment for d:

    Un adjusted Balance = $ 31,400 Cr

    Estimated Balance - $ 175000 Cr

    Required Adjustment = $ 143,600

    End of period adjustment entry

    Bad Debts Expense $ 143,600 Dr

    Allowance for Doubtful Accounts $ 143,600 Cr.
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