Question
[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
[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 | $ | 1,905,000 | |
Credit sales | 5,682,000 | ||
In addition, its unadjusted trial balance includes the following items.
Accounts receivable | $ | 1,270,100 | debit |
Allowance for doubtful accounts | 16,580 | debit | |
Required: 1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
a. Bad debts are estimated to be 1.5% of credit sales.
b. Bad debts are estimated to be 1% of total sales.
c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
Adjusting entries (all dated December 31, 2017).
1a. Bad debts are estimated to be 1.5% of credit sales.
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1b. Bad debts are estimated to be 1% of total sales.
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1c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
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2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a.
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3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1c.
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