The following information is available for Smith Associates at the end of 2012:
ID: 2373336 • Letter: T
Question
The following information is available for Smith Associates at the end of 2012:
Answer the following questions
1. If bad debts are estimated as 1% of Net Sales, how much will Smith report as Bad Debts Expense for 2012?
2. If bad debts are estimated as 1% of Net Sales, how much will Smith's ending balance be in the Allowance for Doubtful Accounts?
3. If bad debts are estimated to be 10% of Gross Accounts Receivable, how much will Smith report as Bad Debts Expense for 2012?
4. If bad debts are estimated to be 10% of Gross Accounts Receivable, how much will Smith's ending balance be in the Allowance for Doubtful Accounts?
$480,000 Sales Returns
$19,000 Accounts Receivable - Dec. 31, 2012
$156,000 Allowance for Doubtful Accts - Before Adjustment
$4,000
Explanation / Answer
1) Dr Bad debt expense ...... 4610 ((480000- 19000) * 0.01)
2) Cr allowance for Doubtful accounts .....4610
3) Dr bad debt expense ..... 15600 (10% *156000)
4) Cr allowance for doubtful accounts.....15600
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