Question

Providing for Doubtful Accounts

At the end of the current year, the accounts receivable account has a debit balance of $1,154,000 and sales for the year total $13,090,000.

The allowance account before adjustment has a credit balance of $15,600. Bad debt expense is estimated at 1/4 of 1% of sales.

The allowance account before adjustment has a credit balance of $15,600. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $49,900.

The allowance account before adjustment has a debit balance of $7,900. Bad debt expense is estimated at 1/2 of 1% of sales.

The allowance account before adjustment has a debit balance of $7,900. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $65,600.

Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.

a.	$
b.	$
c.	$
d.	$

Answer 1

Solution a:

Estimated bad debts expense = 1/4 of 1% of sales

amount of the adjusting entry to provide for doubtful accounts = $1,154,000 * 1%*1/4 = $2,885

Solution b:

Estimated doubtful accounts on the basis of customer ageing = $49,900

Existing balance in allowance account = $15,600 credit

Amount of the adjusting entry to provide for doubtful accounts = $49,900 - $15,600 = $34,300

Solution c:

Estimated bad debts expense = 1/2 of 1% of sales

amount of the adjusting entry to provide for doubtful accounts = $1,154,000 * 1%*1/2 = $5,770

Solution d:

Estimated doubtful accounts on the basis of customer ageing = $65,600

Existing balance in allowance account = $7,900 debit

Amount of the adjusting entry to provide for doubtful accounts = $65,600 - $7,900 = $73,500