Question
Aunt Hazel's Cookie Kitchen is in the business of selling cookie care package baskets to the parents of college students. Recently, Aunt Hazel experimented with
Aunt Hazel's Cookie Kitchen is in the business of selling cookie "care package" baskets to the parents of college students. Recently, Aunt Hazel experimented with some new recipes and came up with a vitamin-packed broccoli-spinach chip cookie. The parents ordered $400,000 in cookies (16,000 orders @ $25 each) in early December 20X5 because they naturally were concerned about the health of their children and Aunt Hazel has a great marketing team. All $400,000 were credit sales. Unfortunately, late in December, 1,000 orders were returned to Aunt Hazel. The students thought the cookies were disgusting! At year-end, Aunt Hazel's best estimate is that 90% of the remaining broccoli-spinach chip orders will be returned. (Aunt Hazel's best estimate is that none of her other cookie packages will be returned.)
Aunt Hazel's uses the Accounts Receivable approach to estimate uncollectibles. Based on past experience, Aunt Hazel's sets the single rate for uncollectibles at 5%.
Requirement 1: Show the entry that would have been made when the 1,000 cookie orders were returned in late December 20X5 before 12/31/20X5.
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