At December 31, 2011, Ethan Company reports the following results for its calendar-year.
Cash sales $ 1,803,750
Credit sales 3,534,000
In addition, its unadjusted trial balance includes the following items.
Accounts receivable $1,070,100 Debit
Allowance for doubtful accounts 15,750 Debit
1.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 2% of credit sales.
b. Bad debts are estimated to be 1% of total sales.
c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
Adjusting entries (all dated December 31, 2011).
A. Bad Debts Expense 70680
Allowance for Doubtful Accounts 70680
B. Bad Debts Expense 53378
Allowance for Doubtful Accounts 53378
C. Bad Debts Expense 69255
Allowance for Doubtful Accounts 69255
2.Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2011, balance sheet given the facts in part 1a. (Amounts to be deducted should be indicated with minus sign. Omit the "tiny_mce_markerquot; sign in your response.)
Accounts Receivable 1070100
Less: Allowance for Doubtful Accounts ? Equals ?
3.Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2011, balance sheet given the facts in part 1c. (Amounts to be deducted should be indicated with minus sign. Omit the "tiny_mce_markerquot; sign in your response.)