The following information applies to the questions displayed below At December 3

Question

The following information applies to the questions displayed below At December 31, 2013, Hawke Company reports the following results for its calendar-year. Cash sales Credit sales $ 1,802,240 3,890,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable Allowance for doubtful accounts S 1,178,670 debit 20,660 debit Required: 1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions a. Bad debts are estimated to be 2% of credit sales. b. Bad debts are estimated to be 1% of total sales C. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible. Adjusting entries (all dated Decomber 31, 2013)

Explanation / Answer

1) Adjusting entry no Transaction General Journal Debit Credit 1 a. Bad debts expense 77800 Allowance for Doubtful accounts 77,800 (3,890,000*2%) b. Bad debts expense 56922 Allowance for Doubtful accounts 56,922 (1,802,240+3,890,000)*1% c. Bad debts expense 79594 Allowance for Doubtful accounts 79,594 (1,178,670*5%)+20,660 2) for part 1a Current assets Accounts receivable 1,178,670 less:Allowance for doubtful accounts(77,800-20,660) 57140 1,121,530

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