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These are two separate questions, I do not understand so any help would be great!

(1)
Total credit sales : \$2,500,000
Accounts receivable at December 31: 970,000
Bad debts written off : 66,000

a) Assume that Hamilton Company estimates its bad debts expense based on 7% of accounts receivable. What amount of bad debts expense will Hamilton record if it has an Allowance for Doubtful Accounts credit balance of \$3,000?
b) Assume that Hamilton Company estimates its bad debts expense based on 7% of accounts receivable. What amount of bad debts expense will Hamilton record if it has an Allowance for Doubtful Accounts debit balance of \$3,000?

(2)
On April 2, Julie Keiser uses her JCPenney Company credit card to purchase merchandise from a JCPenney store for \$1,500. On May 1, Keiser is billed for the \$1,500 amount due. Keiser pays \$900 on the balance due on May 3. On June 1, Keiser receives a bill for the amount due, including interest at 1% per month on the unpaid balance as of May 3. Prepare the entries on JCPenney Co.'s books related to the transactions that occurred on April 2, May 3, and June 1.

What are the May 3 and June 1 account titles and amounts?

#### Solution Preview

(1)
a) Assume that Hamilton Company estimates its bad debts expense based on 7% of accounts receivable. What amount of bad debts expense will Hamilton record if it has an Allowance for Doubtful Accounts credit balance of \$3,000?

AR = 970,000 and they estimate bad debt expense at .07 of AR. 970,000 x .07 = 67,900.
The journal entry would therefore be:

Bad debt expense : 67,900 - 3,000 = 64,900
Allowance for doubtful accounts : 64,900

b)What amount of bad debts expense will ...

#### Solution Summary

This solution explains debit and credit transactions based on the information provided. I also explain the account titles and amounts. Each question is clearly answered and explained.

\$2.49