#3Presented The trial balance before adjustment of ABC Company reports the following balances at 12/31/2016, the company's...
Question:
#3Presented The trial balance before adjustment of ABC Company reports the following balances at 12/31/2016, the company's fiscal year end:
Dr.Cr.
Accounts receivable$300,000
Allowance for doubtful accounts$5,000
Sales (all on credit)$1,700,000
Sales returns and allowances$80,000
Using the attached T-account template:
?Record the balances as indicated above. Label these unadjusted balances "B" for balance.
?After a careful analysis of the aged receivables:
?Management wrote off $22,000 of receivables considered to be uncollectible. Pre pare the entry and label is "a"
?Management estimated bad debt expense assuming that the doubtful accounts are 6% of gross accounts receivable. Pre pare the entry and label it "b"
Using the attached T-account:
a.Enter the accounts and balances.
b.Pre pare the entry for estimated bad debts assuming that doubtful accounts are estimated to be 6% of gross accounts receivable.
c.Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $5,000 instead of a credit balance.How will this difference affect the journal entry in part (a)?
d.What is the theoretical justification for the percentage-of-receivables method used to estimate bad debts?
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