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    The trial balance before adjustment of Pratt Company reports the following balances.... Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 7% of gross accounts receivable and (2) 1% of net sales.

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    The trial balance before adjustment of Pratt 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 40,000

    INSTRUCTIONS:

    (a) Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 7% of gross accounts receivable and (2) 1% 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 par (a)?

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    https://brainmass.com/business/trial-balance/135073

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    (a)(1)
    Bad Debt Expense $4,500
    Allowance for Doubtful Accounts $4,500
    Record Estimated Bad Debts 7% of Gross Accounts Receivable ($100,000 X 7% = $7,000) ($7,000 total less $2,500 already on books = ...

    Solution Summary

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    $2.19

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