At December 31. 2017. Hawke Company reports the following results for its calend

Question

At December 31. 2017. Hawke Company reports the following results for its calendar year Cash sales Credit sales $1,644,828 3,686,08e In addition, its unadjusted trial balance includes the following items. Accounts receivable Allowance for doubtful accounts $1,116,858 debit 17,290 debit Required: 1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions b. c, Bad debts are estimated to be 3% of credit sales. Bad debts are estimated to be 2% of total sales. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible. djusting entries (all dated December 31, 2017) KPrev2 3 4 of 4 Next> arch

Explanation / Answer

Solution 2:

Estimated bad debts = 3% of credit sales = $3,686,000 * 3% = $110,580

Bad debts expense to be recorded = $110,580

Ending balance of allowance for doubtful accounts = $110,580 - $17,290 = $93,290

Solution 3:

Required balance of allowance for doubtful accounts = $1,116,858 * 6% = $67,011.48

Balance in allowance for doubtful accounts = $17,290 Debit

Bad debts expense to be recorded = $67,011.48 + $17,290 = $84,301.48

Balance Sheet (Partial) - Hawke Company As on December 31, 2017 Particulars Amount Accounts Receivables (Gross) $1,116,858.00 Less: Allowance for doubtful accounts $93,290.00 Accounts receivables (Net) $1,023,568.00

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