Sather Ltd. had the following unadjusted account balances at December 31, 2015: Accounts Receivable$150,000 Allowance for Doubtful

Question:

Sather Ltd. had the following unadjusted account balances at December 31, 2015:
Accounts Receivable$150,000
Allowance for Doubtful Accounts 3,000
Sales 750,000
Required:
1. Assume that Sather Ltd. estimated its uncollectible accounts at December 31, 2015 to be two per cent of sales.
a. Prepare the appropriate adjusting entry to record the estimated uncollectible accounts at December 31, 2015.
b. Calculate the balance in the Allowance for Doubtful Accounts account after posting the adjusting entry.
2. Assume that Sather Ltd. estimated its uncollectible accounts at December 31, 2015 to be ten per cent of the net balance.
a. Prepare the appropriate adjusting entry to record the estimated uncollectible accounts at December 31, 2015.
b. Calculate the balance in the Allowance for Doubtful Accounts account after posting the adjusting entry.
3. Why is there a difference in the calculated estimates of doubtful accounts in questions 1 and 2? Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...