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Preparing an adjusting entry

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10-The following information was abstracted from the records of the Hooper Corporation:

Accounts Receivable, December 31, 2011 ............ $ 590,000
Allowance for Doubtful Accounts before adjustment,
December 31, 2011 ............................... 18,000 (dr)
Sales--2011........................................ 2,180,000
Sales Discounts--2011 ............................. 18,000
Sales Returns--2011 ............................... 27,000

Prepare the adjusting entry for doubtful accounts expense under each of the following assumptions:
(1) 3 percent of outstanding accounts receivable are uncollectible.
(2) 1.5 percent of 2011 net sales are uncollectible.
(3) An aging schedule of the accounts shows that $21,400 of the accounts are uncollectible.

Note that the allowance for doubtful accounts above is a DEBIT balance!

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Solution Preview

Allowance for Doubtful Debts Account
(1) 3 percent of outstanding accounts receivable are uncollectible.
3% of Accounts Receivable (590000 X 3/100) $17700
Add: Allowance for Doubtful Accounts before adjustment,(Dr Balance) $18000
Allowance for doubtful debt required $35700

Calculation of Net Sales:
Gross sales 2180000
Less: Sales Discount 18000
Less: sales return 27000 45000
Net sales 2135000

Note: In percentage-of-receivables Method the amount of the estimated loss is calculated as a percentage of Account receivable balance at the end of the given period and the ...

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