Exercise 7-9 The trial balance before adjustment of Culver Inc. shows the follow

Question

Exercise 7-9 The trial balance before adjustment of Culver Inc. shows the following balances. Cr. Accounts Receivable Allowance for Doubtful Accounts Sales Revenue (all on credit) $96,000 2,170 $570,700 Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 5% of gross accounts receivable and (b) 6% of gross accounts receivable and Allowance for Doubtful Accounts has a $1,858 credit balance. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Account Titles ad Explanation Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO TEXT VIDEO: SIMILAR EXERCISE

Explanation / Answer

Answer a

5% of the gross account receivble

Allowance needed = ($96,000 * 5 %) = $4,800 ; Allowance for Doubtful Accounts :$2,170 (Dr)

Bad debt expenses : $4,800 + $2,170 =$6,970

Journal Entry

Answer b

6% of the gross account receivble & Allowance for Doubtful Accounts has $1,858 credit balance

Allowance needed = ($96,000 * 6%) = $5,760 ; Allowance for Doubtful Accounts :$1,858 (Cr)

Bad debt expenses : $5,760 - $1,858 =$3,902

Journal Entry

No Accounts Title & Explanation Debit ($) Credit ($) a) Bad Debt Expenses 6,970 Allowance for Doubtful Accounts 6,970

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