Computing Bad Debts and Preparing Journal Entries
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The trial balance before adjustment of Reba McIntyre Inc. shows the following balances.
Dr. Cr.
Accounts Receivable $90,000
Allowance for Doubtful Accounts 1,750
Sales (all on credit) $680,000
Instructions
Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 4% of gross accounts receivable and (b) 1% of net sales.
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Solution Summary
The solution explains how to prepare the adjusting entries for bad using the percentage of receivables method and the percentage of sales method
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(a) 4% of gross accounts receivable
The gross accounts receivable are 90,000 and 4% of this is 3,600. In percentage of accounts receivable method we take into consideration the balance ...
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