Question

describe the process followed when estimating bad debt expense under the percentage of sales method.

describe the process followed when estimating bad debt expense under the percentage of sales method.

Homework Answers

Answer #1

The following process is followed in estimating the bad debt expense under % of sales method.

Step1. Compute the credit sales net for the period.

Step2. Estimate the percentage of credit sales unrealised based on the past experience

Step3: Apply the percentage on the net credit sales to estimate the sales to be unrealisable and hence recorded as Ba debt expense. This method of computing the bad debts xpense does not take in to account the balance in hand in Allowance for uncollectible accounts on the date of adjustment of bad debt expense.

Step4. The journal entry for the bad debt expense is as follows:

Bad debts expense Account Dr. (Amount computed in Step 3)

Allowance for uncollectible account

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Crane Company uses the percentage of sales method for recording bad debts expense. For the year,...
Crane Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $590000 and credit sales are $2600000. Management estimates that 3% is the sales percentage to use. What adjusting entry will Crane Company make to record the bad debts expense? Bad Debt Expense 78000     Accounts Receivable 78000 Bad Debt Expense 17700     Accounts Receivable 17700 Bad Debt Expense 17700    Allowance for Doubtful Accounts 17700 Bad Debt Expense 78000     Allowance for Doubtful Accounts 78000
Momrow Inc. uses the percentage of credit sales method to estimate its bad debt expense and...
Momrow Inc. uses the percentage of credit sales method to estimate its bad debt expense and estimates that 5% of credit sales will result in uncollectible accounts. The company had $320,000 of net credit sales during the year, and its Allowance for Doubtful Accounts has an unadjusted credit balance of $6,300. After making the adjusting entry for to record bad debt expense, what is the ending balance in the Allowance for Doubtful Accounts account? Multiple Choice $12,600. $9,700. $16,000. $22,300.
If Apple Co uses the percentage-of-sales method to estimate bad debt expenses and it estimates that...
If Apple Co uses the percentage-of-sales method to estimate bad debt expenses and it estimates that 1.5% of credit sales will be uncollectible, what will be the adjusting journal entry to record bad debt expense on December 31, 2019?
Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is increased... A....
Under the direct write-off method of accounting for uncollectible accounts, Bad Debt Expense is increased... A. when a credit sale is past due. B. at the end of each accounting period. C. whenever a pre-determined amount of credit sales have been made. D. when an account is determined to be uncollectible.
Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is...
Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2018, net credit sales totaled $6,400,000, and the estimated bad debt percentage is 1.40%. The allowance for uncollectible accounts had a credit balance of $61,000 at the beginning of 2018 and $49,500, after adjusting entries, at the end of 2018. Required: 1. What is bad debt expense for 2018 as a percent of net credit sales?...
Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is...
Johnson Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2018, net credit sales totaled $6,500,000, and the estimated bad debt percentage is 1.50%. The allowance for uncollectible accounts had a credit balance of $62,000 at the beginning of 2018 and $50,000, after adjusting entries, at the end of 2018. Required: 1. What is bad debt expense for 2018 as a percent of net credit sales?...
rose company uses the percentage of receivables method for recording bad debt expense. the accounts receivable...
rose company uses the percentage of receivables method for recording bad debt expense. the accounts receivable balance is $25,000 and credit sales ar $100,000. management estimates that 6% of accounts receivable will be uncollectible. what adjusting entry will rose company make if the allowance for doubtful accounts has a balance of $250 before adjustment?
Analyzing and Reporting Receivable Transactions and Uncollectible Accounts Using Percentage-of-Sales Method to Estimate Bad Debt Expense...
Analyzing and Reporting Receivable Transactions and Uncollectible Accounts Using Percentage-of-Sales Method to Estimate Bad Debt Expense At the beginning of the year, Penman Company had the following account balances. Accounts receivable $213,600 Allowance for uncollectible accounts12,840 During the year, Penman’s credit sales were $1,204,800, and collections on accounts receivable were $1,177,800. The following additional transactions occurred during the year. Feb. 17 Wrote off Bava’s account, $4,920. May 28 Wrote off Reed’s account, $2,880. Dec. 15 Wrote off Fischer’s account, $1,380....
Your company uses the percentage-of-sales method to estimate bad debts. You have $4,000,000 of credit sales,...
Your company uses the percentage-of-sales method to estimate bad debts. You have $4,000,000 of credit sales, of which estimate 4% will be uncollectible. You currently have a $35,000 credit balance in A4UA. Journalize the bad debt expense for the period. What is the ending A4UA balance?
Entity G uses the percentage of receivables method for recording bad debts expense. The accounts receivable...
Entity G uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $500,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Entity G make if the Allowance for Doubtful Accounts has a credit balance of $4,000 before adjustment? Dr. Bad Debt Expense                                     21,000       Cr. Accounts Receivable                                             21,000 Dr. Bad Debt Expense                                     21,000       Cr. Allowance for Doubtful Accounts                      21,000 Dr. Bad Debt Expense...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT