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The allowance method requires an estimate of uncollectible accounts at the end of the period. This estimate is normally based on past experience, industry averages,
The allowance method requires an estimate of uncollectible accounts at the end of the period. This estimate is normally based on past experience, industry averages, and forecasts of the future. The two methods used to estimate uncollectible accounts are as follows: Percent of sales method Analysis of receivables method Percent of Sales Method: Since accounts receivable are created by credit sales, uncollectible accounts can be estimated as a percent of credit sales. If the portion of credit sales to sales is relatively constant, the percent may be applied to total sales. Learning Expectations Estimate uncollectible accounts using the percentage of sales method. Journalize the adjusting entry for uncollectible accounts and determine the adjusted balances of bad debt expense and allowance for doubtful accounts. Dynamic Exhibit Use the Dynamic Exhibit to answer the following questions. When the percent of uncollectible accounts is .75%, the entry for bad debt expense is a debit to bad debt expense for When the percent of uncollectible accounts is 1%, the entry for bad debt expense is a debit to bad debt expense for When the unadjusted balance of Allowance for Doubtful Accounts is a debit of S2, 100, and the percent of uncollectible accounts is .75%, the adjusted balance at December 31 after the entry for uncollectible accounts is made is When the unadjusted balance of Allowance for Doubtful Accounts is a credit of $3, 250, and the percent of uncollectible accounts is .75%, the adjusted balance at lx December 31 after the entry for uncollectible accounts is mode is The allowance method requires an estimate of uncollectible accounts at the end of the period. This estimate is normally based on past experience, industry averages, and forecasts of the future. The two methods used to estimate uncollectible accounts are as follows: Percent of sales method Analysis of receivables method Percent of Sales Method: Since accounts receivable are created by credit sales, uncollectible accounts can be estimated as a percent of credit sales. If the portion of credit sales to sales is relatively constant, the percent may be applied to total sales. Learning Expectations Estimate uncollectible accounts using the percentage of sales method. Journalize the adjusting entry for uncollectible accounts and determine the adjusted balances of bad debt expense and allowance for doubtful accounts. Dynamic Exhibit Use the Dynamic Exhibit to answer the following questions. When the percent of uncollectible accounts is .75%, the entry for bad debt expense is a debit to bad debt expense for When the percent of uncollectible accounts is 1%, the entry for bad debt expense is a debit to bad debt expense for When the unadjusted balance of Allowance for Doubtful Accounts is a debit of S2, 100, and the percent of uncollectible accounts is .75%, the adjusted balance at December 31 after the entry for uncollectible accounts is made is When the unadjusted balance of Allowance for Doubtful Accounts is a credit of $3, 250, and the percent of uncollectible accounts is .75%, the adjusted balance at lx December 31 after the entry for uncollectible accounts is mode is
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