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)
Entry for bad debt expenses
A recent report for UPS contained the following data: (in thousands) Accounts receivable Less: Allowance for bad debts Net accounts receivable Bad debt expense Current year $1,034,608 36,800 $ 997,808 $55,147 Previous year $ 805,495 38,225 S 767,270 $31,388 Required: 1. Prepare the journal entry for the amount of accounts receivable that were actually written off during the current year. 2. Prepare the journal entry to record the bad debt expense for the current year 3. What is the purpose of the account "Allowance for doubtful accounts"? Although the normal balance of this account is a credit balance, it sometimes has a debit balance. Briefly explain how this can happen.
(Recording Bad Debts) Duncan Company reports the following financial information before adjustments. Debit Credit Accounts Receivable $90,000 Allowance for Doubtful Accounts $1,750 Sales Revenue (all on credit) $680,000 Prepare the journal entry to record bad debt expense assuming Duncan Company estimates bad debts at (a) 1% of net sales and (b) 5% of accounts receivable.
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4. Tooele Company's controller estimated bad debt expense using the percentage of accounts receivable method. Total sales for the year were $500,000 of which 250,000 are on account. The ending balance in accounts receivable was $100,000. An examination of the outstanding accounts at the end of the year indicates that approximately 12 percent of these accounts will ultimately prove to be uncollectible. Before any adjusting entries, the balance in the Allowance for Doubtful Accounts is $700 (CREDIT). Which is part of the correct adjusting entry to record bad debt expense for the year? (The Allowance for Doubtful Accounts is also known as the Allowance for Bad Debts or the Allowance for Uncollectible Accounts.) a. CREDIT Allowance for Bad Debts for $11,300 b. DEBIT Allowance for Bad Debts for $11,300 c. CREDIT Allowance for Bad Debts for $12,000 d. CREDIT Allowance for Bad Debts for $12,700 e. DEBIT Allowance for Bad Debts for $14,700
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