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Cash and Receivables

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The trial balance before adjustment of Adel Company reports the following balances:

Dr. Cr.
Accounts receivable $100,000
Allowance for doubtful accounts $ 2,500
Sales (all on credit) 650,000
Sales returns and allowances 50,000

my instructions are to
(a)Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 8% of gross accounts receivable and (2) 1½% of net sales.

(b)Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $2,500 instead of a credit balance. How will this difference affect the journal entries in part (a)?

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Solution Summary

The trial balance before adjustment of Adel Company reports the following balances.

Solution provided by:
Manal Elkhoshkhany, MBA
Education
  • BA, Ain Shams University, Cairo Egypt
  • MBA, California State University, Sacramento
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