Assume that Silver Company has total sales of $90,000 during 2020 and the Accounts Receivable balance on December 31 2020, is $50,000. Required: (1) Prepare the adjusting entry to record the estimated bad debts, which are estimated to be 5% of total sales on December 31, 2020. There is a zero balahce in the Allowance for Doubtful Accounts at December 31. (2) Prepare the adjusting entry to record the estimated bad debts, which are estimated to be 5% of accounts Receivable on December 31. 2020, There is a zero balance in the Allowance for Doubtful Accounts at December 31. Example of Answer: Dr. Equipment 10,000 Cr. Cash 10,000 For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac). BIUS 14px E v E V T. Paragraph Arial Activate Windows GodwORDS BOWERED BY INWindows P.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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