At December 31, Folgeys Coffee Company reports the following results for its calendar year.
Its year-end unadjusted trial balance includes the following items.
Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (a) 6% of credit sales, (b) 4% of total sales and (c) 9% of year-end accounts receivable.
Explanation
a.
Bad debts expense $311,000 × 0.06 = $18,660
b.
Bad debts expense [($311,000 + $911,000) × 0.04] = $48,880
c.
Bad debts expense:
Thank you!
| Cash sales | $ | 911,000 |
| Credit sales | 311,000 | |
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Its year-end unadjusted trial balance includes the following items.
| Accounts receivable | $ | 136,000 | debit |
| Allowance for doubtful accounts | 6,100 | debit | |
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Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (a) 6% of credit sales, (b) 4% of total sales and (c) 9% of year-end accounts receivable.
Explanation
a.
Bad debts expense $311,000 × 0.06 = $18,660
b.
Bad debts expense [($311,000 + $911,000) × 0.04] = $48,880
c.
Bad debts expense:
| Unadjusted balance | $ | 6,100 | debit |
| Estimated balance ($136,000 × 9%) | 12,240 | credit | |
| Required adjustment | $ | 18,340 | credit |
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Thank you!
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