Required information [The following information applies to the questions display

Question

Required information

[The following information applies to the questions displayed below.]

At December 31, 2017, Hawke Company reports the following results for its calendar year.

Cash sales

$

1,297,780

Credit sales

3,948,000

In addition, its unadjusted trial balance includes the following items.

Accounts receivable

$

1,196,244

debit

Allowance for doubtful accounts

19,660

debit

Required:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.

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.

Adjusting entries (all dated December 31, 2017).

Journal entry worksheet

·         Bad debts are estimated to be 3% of credit sales.

Note: Enter debits before credits.

Transaction

General Journal

Debit

Credit

a.

Journal entry worksheet

·         Bad debts are estimated to be 2% of total sales.

Transaction

General Journal

Debit

Credit

b.

Journal entry worksheet

·         An aging analysis estimates that 6% of year-end accounts receivable are uncollectible.

Transaction

General Journal

Debit

Credit

c.

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a.
  
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1c.
  

Cash sales

$

1,297,780

Credit sales

3,948,000

Explanation / Answer

1) Adjusting entry no Transaction General Journal Debit Credit 1 a. Bad debts expense 118440 Allowance for Doubtful accounts 118,440 (3,948,000*3%) b. Bad debts expense 104916 Allowance for Doubtful accounts 104,916 (1297,780+3,948,000)*2% c. Bad debts expense 91435 Allowance for Doubtful accounts 91,435 (1,196,244*6%)+19660 2) for part 1a Current assets Accounts receivable 1,196,244 less:Allowance for doubtful accounts(118,440-19,660) 98780 1,097,464 For part 1c Current assets Accounts receivable 1,196,244 less:Allowance for doubtful accounts 71775 1,124,469 (1196244*6%)

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