Question

At December 31, 2017, Hawke Company reports the following results for its calendar year.

Cash sales	$	1,891,680
Credit sales		3,251,000

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

Accounts receivable	$	985,053	debit
Allowance for doubtful accounts		12,260	debit

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

Bad debts are estimated to be 2% of credit sales.

Bad debts are estimated to be 1% of total sales.

An aging analysis estimates that 5% of year-end accounts receivable are uncollectible

Answer is complete and correct.

No	Transaction	General Journal	Debit	Credit
1	a.	Bad debts expenseselected answer correct	65,020selected answer correct	not attempted
		Allowance for doubtful accountsselected answer correct	not attempted	65,020selected answer correct
2	b.	Bad debts expenseselected answer correct	51,427selected answer correct	not attempted
		Allowance for doubtful accountsselected answer correct	not attempted	51,427selected answer correct
3	c.	Bad debts expenseselected answer correct	61,513selected answer correct	not attempted
		Allowance for doubtful accounts

Answer is complete but not entirely correct.

Current assets:
Accounts receivableselected answer correct	$985,053selected answer correct
Less: Allowance for doubtful accountsselected answer correct	12,260selected answer incorrect	$972,793

Current assets:
Accounts receivableselected answer correct	$985,053selected answer correct
Less: Allowance for doubtful accountsselected answer correct	12,260selected answer incorrect	$972,793

Answer 1

1	a.	Bad debts expense				65020
		Allowance for Doubtful accounts					65,020
		(3,251,000*2%)
	b.	Bad debts expense				51427
		Allowance for Doubtful accounts					51,427
		(1,891,680+3251,000)*1%
	c.	Bad debts expense				61513
		Allowance for Doubtful accounts					61,513
		(985,053*5%)+12,260
2)		for part 1a
		Current assets
		Accounts receivable						985,053
		less:Allowance for doubtful accounts(65,020-12,260)						52760	932,293
		For part 1c
		Current assets
		Accounts receivable						985,053
		less:Allowance for doubtful accounts(61,513-12,260)						49253	935,800