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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 < 1 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

--Requirement 1

Transaction	Accounts title	Debit	Credit
[a]	Bad Debt Expense ($3177000 credit sale x 3%)	$95,310
	Allowance for doubtful accounts		$95,310
	(to record bad debt expense)
[b]	Bad Debt Expense ([$3177000 credit sale + $ 1412210 cash sale] x 2%)	$91,784
	Allowance for doubtful accounts		$91,784
	(to record bad debt expense)
[c]	Bad Debt Expense [($962631 x 6%) + $22440 debit balance existing]	$80,198
	Allowance for doubtful accounts		$80,198
	(to record bad debt expense)