Chapter 7, Problem 15E

a

To determine

Concept Introduction: The allowance method records bad debts by matching them with estimated losses from uncollectible accounts receivable. The allowance method requires the estimation of total bad debt expected from sales during the period. This method is better than direct write-off because it records estimated bad debts expense for the period of sales and it reports the estimated amount of cash collected from accounts receivable in the balance sheet.

The estimated balance of allowance for doubtful accounts assuming the company uses 4.5% of total accounts receivable as uncollectible, instead of the aging of receivable.

b

To determine

Concept Introduction: The allowance method records bad debts by matching them with estimated losses from uncollectible accounts receivable. The allowance method requires the estimation of total bad debt expected from sales during the period. This method is better than direct write-off because it records estimated bad debts expense for the period of sales and it reports the estimated amount of cash collected from accounts receivable in the balance sheet.

The year-end adjustment entry to record bad debts assuming allowance for a doubtful account has an unadjusted balance of $12,000 credit.

c

To determine

Concept Introduction: The allowance method records bad debts by matching them with estimated losses from uncollectible accounts receivable. The allowance method requires the estimation of total bad debt expected from sales during the period. This method is better than direct write-off because it records estimated bad debts expense for the period of sales and it reports the estimated amount of cash collected from accounts receivable in the balance sheet.

The year-end adjustment entry to record bad debts assuming allowance for a doubtful account has an unadjusted balance of $1,000 debit.