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Gowns, Inc. uses the percentage of sales basis to estimate its bad debts. For the year ended December 31, 2014, Gowns' total credit sales are €1,500,000. Management of the company estimates that 1% of credit

Gowns, Inc. uses the percentage of sales basis to estimate its bad debts. For the year ended December 31, 2014, Gowns' total credit sales are €1,500,000. Management of the company estimates that 1% of credit

FINANCIAL ACCOUNTING
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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Gowns, Inc. uses the percentage of sales basis to estimate its bad debts. For the year ended December 31, 2014, Gowns' total credit sales are €1,500,000. Management of the company estimates that 1% of credit sales will become uncollectible. The existing balance in the Allowance for Doubtful Accounts is a debit balance of €1,750. The Accounts Receivable balance at December 31, 2014 is €132,000. The entry to record bad debt expense at December 31, 2014 will impact the statement of financial position by Increasing expenses by €13,250 Increasing the Allowance for .Doubtful Accounts by €13,250 Increasing the Allowance for .Doubtful Accounts by €15,000 Increasing the Allowance for .Doubtful Accounts by €16,750
Transcribed Image Text:Gowns, Inc. uses the percentage of sales basis to estimate its bad debts. For the year ended December 31, 2014, Gowns' total credit sales are €1,500,000. Management of the company estimates that 1% of credit sales will become uncollectible. The existing balance in the Allowance for Doubtful Accounts is a debit balance of €1,750. The Accounts Receivable balance at December 31, 2014 is €132,000. The entry to record bad debt expense at December 31, 2014 will impact the statement of financial position by Increasing expenses by €13,250 Increasing the Allowance for .Doubtful Accounts by €13,250 Increasing the Allowance for .Doubtful Accounts by €15,000 Increasing the Allowance for .Doubtful Accounts by €16,750
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