On December 31, 2020, Corotel Company's year-end, the unadjusted trial balance included the following items: Account Accounts receivable Allowance for doubtful accounts Sales ($2,790,000 cash sales) View transaction list Debit $2,090,000 32,000 Required: 1. Prepare the adjusting entry needed in Corotel's books to recognize bad debts under each of the following independent assumptions. a. Bad debts are estimated to be 2% of credit sales. b. An analysis suggests that 5% of outstanding accounts receivable on December 31, 2020, will become uncollectible. Journal entry worksheet 1 Note: Enter debits before credits. Transaction Dec 31 Record the estimate for uncollectible accounts. Credit $11,160,000 General Journal Bad debt expense Allowance for doubtful accounts Debit Credit 223,200 223,200

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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.