At the end of the current year, the accounts receivable account has a debit balance of $6,125,000 and net sales for the year total $66,800,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:
a. The allowance account before adjustment has a debit balance of $18,000. Bad debt expense is estimated at ¾ of 1% of net sales.
b. The allowance account before adjustment has a debit balance of $18,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $475,000.
c. The allowance account before adjustment has a credit balance of $10,000. Bad debt expense is estimated at ½ of 1% of net sales.
d. The allowance account before adjustment has a credit balance of $10,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $360,000.
Answer:
a. $501,000 ($66,800,000 × 0.0075)
b. $493,000 ($475,000 + $18,000)
c. $334,000 ($66,800,000 × 0.0050)
d. $350,000 ($360,000 – $10,000)