Question

2. Better Products is undecided about which base to use in estimating uncollectible accounts. On December 31, 2019, the balance in Accounts Receivable was $680,000.   Net credit sales during 2019 amounted to $3,900,000. An analysis of the accounts receivable aging under the percentage of receivables method indicated that $38,000 in accounts receivable is expected to be uncollectible. Past experience has shown that about 1% of net credit sales eventually are uncollectible.

Prepare the adjusting entries to record estimated bad debts expense using the:

(a) Percentage of sales method assuming the Allowance for Doubtful Accounts has a credit balance of

       $3,200 before adjustment

Date	Account Titles	Debit	Credit

(b) Percentage of accounts receivable method assuming the Allowance for Doubtful Accounts has a

        credit balance of $730 before adjustment

Date	Account Titles	Debit	Credit

Answer 1

(a) Percentage of sales method assuming the Allowance for Doubtful Accounts has a credit balance of

       $3,200 before adjustment

Date	Account Titles	Debit	Credit
Dec 31	Bad debt expense (3900000*1%)	39000
	Allowance for doubtful accounts		39000

(b) Percentage of accounts receivable method assuming the Allowance for Doubtful Accounts has a

        credit balance of $730 before adjustment

Date	Account Titles	Debit	Credit
Dec 31	Bad debt expense (38000-730)	37270
	Allowance for doubtful accounts		37270