At December 31, 2017, Hawke Company reports the following results for its calendar year. Cash sales Credit sales $1,738,920 2,812,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable Allowance for doubtful accounts $852,036 debit 10,250 debit Problem 9-2A Part 1 Required: 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 3% of credit sales. b. Bad debts are estimated to be 2% of total sales. c. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible. Adjusting entries (all dated December 31, 2017).

At December 31, 2017, Hawke Company reports the following results for its calendar year. Cash sales Credit sales $1,738,920 2,812,000 In addition, its unadjusted trial balance includes the following items. Accounts receivable Allowance for doubtful accounts $852,036 debit 10,250 debit Problem 9-2A Part 1 Required: 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 3% of credit sales. b. Bad debts are estimated to be 2% of total sales. c. An aging analysis estimates that 6% of year-end accounts receivable are uncollectible. Adjusting entries (all dated December 31, 2017).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

Question

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**Educational Content: Accounting Adjustments for Bad Debts**

**Hawke Company Financial Overview**

As of December 31, 2017, Hawke Company reported the following financial results for its calendar year:

- **Cash Sales:** $1,738,920
- **Credit Sales:** $2,812,000

In addition, the company's unadjusted trial balance included these items:

- **Accounts Receivable:** $852,036 (debit)
- **Allowance for Doubtful Accounts:** $10,250 (debit)

**Problem 9-2A Part 1**

**Objective:**
Prepare the adjusting entry for the company to recognize bad debts under each of the following independent assumptions.

**Assumptions:**

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

*All adjusting entries are dated December 31, 2017.*

**Instructions:**

1. Calculate the estimated bad debts for each assumption.
2. Record the necessary adjusting journal entries to reflect these estimates on the company’s financial statements.

This content helps in understanding how companies adjust their financial statements to account for expected losses from uncollectible accounts, which is crucial for maintaining accurate financial records and compliance with accounting standards.

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