Chapter 9, Problem E9.18E

To determine

Allowance method:

Under allowance method, an allowance for bad debts is created with estimation before the bad debts actually become uncollectible. Allowance method aims at accounting for the bad debts during same period in which the sale occurred.

Percent of Receivables Method:

The percent of receivables methods determines the estimated bad debt expense based on the specified percentage of accounts receivables.

To determine:

1.

Journalize the transactions of Hilly Mountain Flagpoles that occurred during 2016.

2.

Posting of transactions to Accounts Receivable and Allowance for Bad Debts T-accounts

3.

Journalize the adjustment to record the bad debts expense of Hilly and post to the appropriate T-accounts.

4.

Determine how Hilly Mountain Flagpoles will report net accounts receivable on its December 31, 2016, balance sheet.