Question

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

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

 Required:

 1. Prepare the adjusting entry to record bad debts under each separate assumption.

 a. Bad debts are estimated to be 1.5% 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).

 2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet given the facts  in part 1a.

 3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31 balance sheet given the facts in part 1c.

Answer 1

1a) Adjusting entry

date	account and explanation	Debit	Credit
	Bad debt expense (5682000*1.5%)	85230
	Allowance for doubtful accounts		85230

1b) Adjusting entry

date	account and explanation	Debit	Credit
	Bad debt expense (7587000*1%)	75870
	Allowance for doubtful accounts		75870

1c) Adjusting entry

date	account and explanation	Debit	Credit
	Bad debt expense (63505+16580)	80085
	Allowance for doubtful accounts		80085

2) Balance sheet presentation

Current assets
Account receivable	1270100
Less; Allowance for doubtful accounts (85230-16580)	-68650	1201450

3) Balance sheet presentation

Current assets
Account receivable	1270100
Less; Allowance for doubtful accounts	-63505	1206595