Comparison of Bad Debt Estimation Methods
Response to the following problem:
The following information (prior to adjustment) is available from the accounting records of the Bradford Company on December 31, 2010:
Cash sales $ 93,100
Net credit sales 262,900
Total sales (net) $356,000
Accounts receivable 126,300
Allowance for doubtful accounts 2,150 (credit)
Required
Prepare journal entries to record the estimate of Bradford's bad debt expense for 2010 assuming:
1. Bad debts are estimated to be 1.5% of total sales (net).
2. Bad debts are estimated to be 2% of net credit sales.
3. Bad debts are estimated to be 5% of gross accounts receivable.