Chapter 8, Problem 8.6EX

Providing for doubtful accounts

At the end of the current year, the accounts receivable account has a debit balance of $2,950,000 and sales for the year total $27,400,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:

1. A. The allowance account before adjustment has a debit balance of $9,500. Bad debt expense is estimated at of 1% of sales.
2. B. The allowance account before adjustment has a debit balance of $9,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $188,000.
3. C. The allowance account before adjustment has a credit balance of $31,400. Bad debt expense is estimated at 1/2 of 1% of sales.
4. D. The allowance account before adjustment has a credit balance of $31,400. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $175,000.