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At December 31, Hawke Company reports the following results for its calendar year.

Cash sales	$	1,776,940
Credit sales	$	3,573,000

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

Accounts receivable	$	1,082,619	debit
Allowance for doubtful accounts	$	22,700	debit

Required:
1. Prepare the adjusting entry to record bad debts under each separate assumption.

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). (Do not round intermediate calculations.)

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

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet given the facts in part 1a.

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet given the facts in part 1c. (Do not round intermediate calculations.)

Answer 1

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