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Chapter 7 Problems

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

Cash sales	$	1,412,210
Credit sales	$	3,177,000

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

Accounts receivable	$	962,631	debit
Allowance for doubtful accounts	$	22,440	debit

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

1. Bad debts are estimated to be 3% of credit sales.
2. Bad debts are estimated to be 2% of total sales.
3. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible.

View transaction list Journal entry worksheet 2 3 Bad debts are estimated to be 3% of credit sales. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal

Answer 1

1.

Bad Debt Expense = Credit sales x percentage estimated as uncollectible

= 3,177,000 x 3%

= $95,310

Journal      

a	Bad debt expense	$95,310
	Allowance for Uncollectible accounts		$95,310

2.

Cash sales = $1,412,210

Credit sales = $3,177,000

Total sales = Cash sales + Credit sales

= 1,412,210 + 3,177,000

= $4,589,210

Bad Debt Expense = Total sales x percentage estimated as uncollectible

= 4,589,210 x 2%

= $91,784

Journal      

b	Bad debt expense	$91,784
	Allowance for Uncollectible accounts		$91,784

3.

Bad Debt Expense = (Accounts receivable ending balance x percentage estimated as uncollectible) + existing debit balance in allowance for doubtful accounts

= 962,631 x 6% + 22,440

= 57,758 + 22,440

= $80,198

Journal      

c	Bad debt expense	$80,198
	Allowance for doubtful accounts		$80,198

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