Journal Entries for the bad debt amounts using two methods
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On December 31, of the current year, a company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance).
Prepare the adjusting journal entry to record the estimate for bad debts assuming:
1. 6% of the accounts receivable balance is assumed to be uncollectible.
2. Bad debts expense is estimated to be 1.5% of credit sales.
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Solution Summary
The solution shows the entries under both methods together with an explanation and a link to another source of information.
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Accounts Receivable $185,600
Total Sales ($1,280,000)
Credit Sales ($960,000)
Allowance account ($1,600)
1. The total in the allowance account should be 185,600 x 6% of accounts receivable = ...
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