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Problem 7-2A Estimating and reporting bad debts LO P2, P3 [The following information applies to the questions displayed below.] At December 31, 2017, Hawke Company

Problem 7-2A Estimating and reporting bad debts LO P2, P3

[The following information applies to the questions displayed below.] At December 31, 2017, Hawke Company reports the following results for its calendar year.

Cash sales $ 1,747,460
Credit sales 2,951,000

In addition, its unadjusted trial balance includes the following items.

Accounts receivable $ 894,153 debit
Allowance for doubtful accounts 13,640 debit

Problem 7-2A Part 1

Required: 1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.

  1. Bad debts are estimated to be 4% of credit sales.
  2. Bad debts are estimated to be 3% of total sales.
  3. An aging analysis estimates that 7% of year-end accounts receivable are uncollectible.

Adjusting entries (all dated December 31, 2017).

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