At December 31, 2018, Hawke Company reports the following results for its calendar year.

Cash sales $ 1,905,000

Credit sales 5,682,000

In addition, its unadjusted trial balance includes the following items.

Accounts receivable $ 1,270,100 debit

Allowance for doubtful accounts 16,580 debit

Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions

a. Bad debts are estimated to be 1.5% of credit sales.

b. Bad debts are estimated to be 1% of total sales.

Question

Business

Luciano Powers

15 August, 19:17

At December 31, 2018, Hawke Company reports the following results for its calendar year.

Cash sales $ 1,905,000

Credit sales 5,682,000

In addition, its unadjusted trial balance includes the following items.

Accounts receivable $ 1,270,100 debit

Allowance for doubtful accounts 16,580 debit

Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions

a. Bad debts are estimated to be 1.5% of credit sales.

b. Bad debts are estimated to be 1% of total sales.

+2

Answers (1)

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Kaleigh Wheeler · Answer 1

The adjusting entries are shown below:

Explanation:

The journal entries are shown below:

a. Bad debt expense $85,230

To Allowance for doubtful debts $85,230

(Being the bad debt expense is recorded)

The computation is shown below:

= $5,682,000 * 1.5%

= $85,230

a. Bad debt expense $75,870

To Allowance for doubtful debts $75,870

(Being the bad debt expense is recorded)

The computation is shown below:

= ($5,682,000 + $5,682,000) * 1%

= $75,870