Recording Accounts and Notes Receivable Transactions; Estimating Bad Debts Clayco Company completes the following transactions during the
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Recording Accounts and Notes Receivable Transactions; Estimating Bad Debts Clayco Company completes the following transactions during the year.
Required
1. Prepare Clayco Company’s journal entries to record these transactions.
2. Prepare a year-end adjusting journal entry as of December 31 for each separate situation.
a. Bad debts are estimated to be $20,400 by aging accounts receivable. The unadjusted balance of the Allowance for Doubtful Accounts is a $1,000 debit.
b. Alternatively, assume that bad debts are estimated using the percent of sales method. The Allowance for Doubtful Accounts had a $1,000 debit balance before adjustment, and the company estimates bad debts to be 1% of its credit sales of $2,000,000.
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