The December 31, 2013 balance sheet of Barone Company had Accounts Receivable of $400,000 and a credit balance in Allowance for Doubtful Accounts of $32,000. During 2014, the following transactions occurred: sales on account $1,500,000; sales returns and allowances, $50,000; collections from customers, $1,250,000; accounts written off $36,000; previously written off accounts of $6,000 vwere collected.
The December 31, 2013 balance sheet of Barone Company had Accounts Receivable of $400,000 and a credit balance in Allowance for Doubtful Accounts of $32,000. During 2014, the following transactions occurred: sales on account $1,500,000; sales returns and allowances, $50,000; collections from customers, $1,250,000; accounts written off $36,000; previously written off accounts of $6,000 vwere collected.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:The December 31, 2013 balance sheet of Barone Company had Accounts Receivable of $400,000 and a
credit balance in Allowance for Doubtful Accounts of $32,000. During 2014, the following transactions
occurred: sales on account $1,500,000; sales returns and allowances, $50,000; collections from
customers, $1,250,000; accounts written off $36,000; previously written off accounts of $6,000 were
collected.
Transcribed Image Text:Instructions
(a) Journalize the 2014 transactions.
(b) if the company uses the percentage-of-sales basis to estimate bad debt expense and anticipates 3%
of net sales to be uncollectible, what is the adjusting entry at December 31, 2014?
(c) If the company uses the percentage of receivables basis to estimate bad debt expense and
determines that uncollectible accounts are expected to be 8% of accounts receivable, what is the
adjusting entry at December 31, 2014?
(d) Which basis would produce a higher net income for 2014 and by how much?
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