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Problem 8-2B Estimating bad debt expense L02,3 CHECK FIGURES: 1b. Bad Debt Expense = $11,240 2. Accounts receivable (net) = $216.160 An asterisk (*) identifies
Problem 8-2B Estimating bad debt expense L02,3 CHECK FIGURES: 1b. Bad Debt Expense = $11,240 2. Accounts receivable (net) = $216.160 An asterisk (*) identifies assignment material based on Appendix 8A or Appendix 8B. On December 31, 2017, Stilton Service Company's year-end, the unadjusted trial balance included the fol- lowing items: Account Credit Debit $239,000 Accounts receivable............. Allowance for doubtful accounts.......... Sales ($470,000 cash sales)............... $ 3,100 1,128,000 Required 1. Prepare the adjusting entry on the books of Stilton Service Company to estimate bad debts under each of the following independent assumptions: a. Bad debts are estimated to be 3% of credit sales. b. An analysis suggests that 6% of outstanding accounts receivable on December 31, 2017, will become uncollectible. 2. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31, 2017, balance sheet given the facts in requirement 1(a). 3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31, 2017, balance sheet given the facts in requirement 1(b). Analysis Component: Would you recommend to Stilton that it use the income statement or the balance sheet approach to estimate uncollectible accounts receivable? Explain why, identifying advantages and disadvantages for each approach
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