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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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