During 2002, Lacee Enterprises had gross sales of ($247,000.) At the end of 2002, Lacee had accounts
Question:
During 2002, Lacee Enterprises had gross sales of \($247,000.\) At the end of 2002, Lacee had accounts receivable of \($83,000\) and a credit balance of \($5,600\) in Allowance for Bad Debts. Lacee has used the percentage-of-sales method to estimate the bad debt expense. For the past several years, the amount estimated to be uncollectible has been 3%.
Instructions:
1. Using the percentage-of-gross-sales method, estimate the bad debt expense and make any necessary' adjusting entries.
2. Assuming that 6% of receivables are estimated to be uncollectible and that Lacee decides to use the percentage-of-receivables method to estimate the bad debt expense, estimate the bad debt expense and make any adjusting entries.
3. Which of the two methods more accurately reflects the net realizable value of receivables? Explain.
Step by Step Answer:
Intermediate Accounting
ISBN: 9780324013078
14th Edition
Authors: Fred Skousen, James Stice, Earl Kay Stice