E6-11 (Algo) Determining Financial Statement Effects of Bad Debts Using the Percentage of Credit Sales Method LO6-2 During the current year, Sun Electronics, Incorporated, recorded credit sales of $740,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. a. On November 13 of the current year, an account receivable for $270 from a prior year was determined to be uncollectible and was written off. b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year. Required: Indicate the effects of the transactions in the following table. Indicate the accounts affected and enter decreases to account categories with a minus sign. Transaction a. a. b. b. Assets Liabilities Stockholders' Equity

E6-11 (Algo) Determining Financial Statement Effects of Bad Debts Using the Percentage of Credit Sales Method LO6-2 During the current year, Sun Electronics, Incorporated, recorded credit sales of $740,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. a. On November 13 of the current year, an account receivable for $270 from a prior year was determined to be uncollectible and was written off. b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year. Required: Indicate the effects of the transactions in the following table. Indicate the accounts affected and enter decreases to account categories with a minus sign. Transaction a. a. b. b. Assets Liabilities Stockholders' Equity

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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E6-8A. Credit Losses Based on Percentage of Credit Sales Los Altos, Inc. uses the allowance method of handling its credit losses. It estimates credit losses at one percent of credit sales, which were $1,800,000 during the year. On December 31, the Accounts Receivable balance was $300,000, and the Allowance for Doubtful Accounts had a credit balance of $20,400 before adjustment. Determine the amount and financial statement effect of the adjustment to record the credit losses for the year. a. b. Show ho w Accounts Receivable and the Allowance for Doubtful Accounts would appear in the December 31 balance sheet.
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E7-9 (Computing Bad Debts and Preparing Journal Entries) The trial balance before adjustment of Estefan Inc. shows the following balances.InstructionsAccounts ReceivableAllowance for Doubtful Accounts Sales Revenue (all on credit) Sales Returns and AllowancesDr. Cr.$80,000 1,750$580,000Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 4% of gross accounts receivable and (b) 1% of net sales.InstructionsAccounts ReceivableAllowance for Doubtful Accounts Sales Revenue (net, all on credit)
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E6-21 (Algo) Recording, Reporting, and Evaluating a Bad Debt Estimate Using the Percentage of Credit Sales Method LO6-2. During the current year, Robby's Camera Shop had sales revenue of $160,000, of which $57,000 was on credit. At the start of the current year, Accounts Receivable showed a $20,000 debit balance and the Allowance for Doubtful Accounts showed a $1,100 credit balance. Collections of accounts receivable during the current year amounted to $55,000. Data during the current year follow: a. On December 31, an Account Receivable (J. Doe) of $1,800 from a prior year was determined to be uncollectible; therefore, it was written off immediately as a bad debt. b. On December 31, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad debt losses on 3.0 percent of credit sales for the year. Required: 1. Prepare the required journal entries for the two items on December 31, the end of the accounting period. 2. Show how the amounts…