EX 9-6 Providing for doubtful accounts

At the end of the current year, the accounts receivable account has a debit balance of $1,275,000 and net sales for the year total $16,000,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:

a. The allowance account before adjustment has a debit balance of $5,000. Bad debt
expense is estimated at ½ of 1% of net sales.
b. The allowance account before adjustment has a debit balance of $5,000. An aging of
the accounts in the customer ledger indicates estimated doubtful accounts of $77,000.
c. The allowance account before adjustment has a credit balance of $7,500. Bad debt
expense is estimated at ¼ of 1% of net sales.
d. The allowance account before adjustment has a credit balance of $7,500. An aging of
the accounts in the customer ledger indicates estimated doubtful accounts of $43,500.

Answer:
a. $80,000 ($16,000,000 × 0.005)

b. $82,000 ($77,000 + $5,000)

c. $40,000 ($16,000,000 × 0.0025)

d. $36,000 ($43,500 – $7,500)

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