Question

At December 31, 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 to record bad debts under each separate assumption.

1. Bad debts are estimated to be 1.5% of credit sales.
2. Bad debts are estimated to be 1% of total sales.
3. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.

At December 31, 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

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

At December 31, 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

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

Answer 1

1) Journal entry

No	General Journal	Debit	Credit
1	Bad debt expense (5682000*1.5%)	85230
	Allowance for doubtful accounts		85230
2	Bad debt expense (7587000*1%)	75870
	Allowance for doubtful accounts		75870
3	Bad debt expense (1270100*5%+16580)	80085
	Allowance for doubtful accounts		80085

2) Presentation

Current assets
Account receivable	1270100
Less: Allowance for doubtful accounts	-68650	1201450

3) Presentation

Current assets
Account receivable	1270100
Less: Allowance for doubtful accounts	-63505	1206595

answered by: anonymous