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Problem 7-2A Estimating and reporting bad debts LO P2, P3

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

Cash sales	$	1,266,330
Credit sales	$	3,708,000

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

Accounts receivable	$	1,123,524	debit
Allowance for doubtful accounts	$	16,940	debit

Problem 7-2A Part 1

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.

Problem 7-2A Estimating and reporting bad debts LO P2, P3

Skip to question

[The following information applies to the questions displayed below.]

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

Cash sales	$	1,266,330
Credit sales	$	3,708,000

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

Accounts receivable	$	1,123,524	debit
Allowance for doubtful accounts	$	16,940	debit

Problem 7-2A Part 2

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

Current assets:
Accounts receivable	$1,123,524
Less: Allowance for doubtful accounts	148,320	$975,204

my less allowance for doubtful accounts is wrong how do i calculate this

Answer 1

Req.1 Journal Entry:

No	Tran.	Account Name		Debit	Credit
1	a.	Bad debts expense		$148,320
		Allowance for Doubtful accounts			$148,320
		(3,708,000 *4%)
	b.	Bad debts expense		$149,230
		Allowance for Doubtful accounts			$149,230
		(1,266,330 +3,708,000)*3%
	c.	Bad debts expense		$95,587
		Allowance for Doubtful accounts			$95,587
		(1,123,524*7%)+16940

Req .2 ( Part A)

Current Assets:
Accounts receivable		1,123,524
less:Allowance for doubtful accounts(148320-16940)		(131,380)9	$ 992,144