At December 31, 2009, Vizarro Company reports the following results for its calendar-year.
Cash sales = $2,184,680
Credit sales = $3,720,000
In addition, its unadjusted trial balance includes the following items.
Accounts Receivable = $1,127,160 debit
Allowance for doubtful accounts = $29,030 debit
REQUIRED:
1. Prepare the adjusting entry for Vizarro Co. to recognize bad debts under each of the following independent assumptions.
a) Bad debts are estimated to be 1.5% of credit sales.
b) Bad debts are estimated to be 1% of total sales.
c) An aging analysis estimates that 3% of year-end accounts receivable are uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2009, balance sheet given the facts in part 1a.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2009, balance sheet given the facts in part 1c.
Check: Bad Debts Expense: 1a) $55,800 1c) $62,845
1a) Bad debts are estimated to be 1.5% of credit sales
Dr Bad Debts Expense $55,800
Cr Allowance for doubtful accounts $55,800
1b) Bad debts are estimated to be 1% of total sales
Dr Bad Debts Expense $59,047
Cr Allowance for doubtful accounts $59,047
c) An aging analysis estimates that 3% of year-end accounts receivable are uncollectible
Dr Bad Debts Expense $62,845 ($1,127,160 x 3% + $29,030)
Cr Allowance for doubtful accounts $62,845
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2009, balance sheet given the facts in part 1a.
Accounts Receivable $1,127,160
less Allowance for doubtful accounts 26,770
Net receivables $1,100,390
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2009, balance sheet given the facts in part 1c.
Accounts Receivable $1,127,160
less Allowance for doubtful accounts = $33,815
Net receivables $1,093,345%0D%0A
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ReplyDeletePardon, but for number 3 the less allowance for doubtful accounts should be $33,825. The allowance for doubtful accounts for 1c) is 62,855 as for the original allowance for doubtful accounts is $29,030. 62,855 - 29,030 = 33,825. Which makes the net receivables 1,127,500 - 33,825 = 1,093,675.
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