Question

Providing for Doubtful Accounts

At the end of the current year, the A claim against the customer created by selling merchandise or services on credit.accounts receivable account has a debit balance of $799,000 and sales for the year total $9,060,000.

The allowance account before adjustment has a credit balance of $10,800. The operating expense incurred because of the failure to collect receivables.Bad debt expense is estimated at 3/4 of 1% of sales.

The allowance account before adjustment has a credit balance of $10,800. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $34,600.

The allowance account before adjustment has a debit balance of $9,400. Bad debt expense is estimated at 1/2 of 1% of sales.

The allowance account before adjustment has a debit balance of $9,400. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $78,000.

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

Answer 1

Solution a:

Amount of the adjusting entry to provide for doubtful accounts = $9,060,000 * 1%*3/4 = $67,950

Solution b:

Amount of the adjusting entry to provide for doubtful accounts = Required in balance in allowance for doubtful accounts - Existing balance in allowance for doubtful accounts

= $34,600 - $10,800 = $23,800

Solution c:

Amount of the adjusting entry to provide for doubtful accounts = $9,060,000 * 1%*1/2 = $45,300

Solution d:

Amount of the adjusting entry to provide for doubtful accounts = Required in balance in allowance for doubtful accounts + Existing debit balance in allowance for doubtful accounts

= $78,000 + $9,400 = $87,400