During the 2022 period, Erickson Company had $445,000 in sales, of which $122,000 were cash sales. On

Fantastic news! We've Found the answer you've been seeking!

Question:

During the 2022 period, Erickson Company had $445,000 in sales, of which $122,000 were cash sales. On December 31, 2022, before the current year's adjusting Journal Entry for future uncollectible accounts, Erickson had a $440 credit balance in Allowance for Doubtful Accounts and a $202,000 debit balance in Accounts Receivables. Assume the company uses the % of sales method for estimating future bad debts and estimates that 2% will be uncollectable in future years.

a. What is the adjusting journal entry needed on December 31, 2022?

b. Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $440 debit balance before the current year's adjusting Journal Entry for estimating future bad debts. Prepare the adjusting entry for the current year's provision for uncollectible accounts.