Chapter 9, Problem 17E

To determine

Percent of Sales Method:

The estimated uncollectible accounts under percent of sales method is computed based on expected percentage of sales assumed to be default.

Percent of Receivable Method:

Percent of receivable method is one of the method of computing the estimated bad debt expense during an accounting period. Bad debt expense under percent of receivable method is estimated based of certain percentage of ending accounts receivable of the business.

To determine:

a. Prepare the adjusting entry to record the bad debts expense assuming uncollectible are estimated to be 0.4% of total revenues.

b. Prepare the adjusting entry to record the bad debts expense assuming uncollectible are estimated to be 2.0% of year-end trade receivables.