Asked by Tyree McDonald on May 08, 2024
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At December 31 of the current year,a company reported the following:
Total sales for the current year: $980,000 includes $160,000 in cash sales
Accounts receivable balance at Dec.31,end of current year: $160,000
Allowance for Doubtful Accounts balance at January 1,beginning of current year: $7,300 credit
Bad debts written off during the current year: $5,800.
Prepare the necessary adjusting entries to record bad debts expense assuming this company's bad debts are estimated to equal 5% of accounts receivable.
Accounts Receivable
Funds that are owed to a company by customers for goods or services delivered or used but not yet paid for, typically within a short-term period.
Allowance for Doubtful Accounts
A contra-asset account that represents the estimated portion of accounts receivable that may not be collectible.
Bad Debts Expense
The amount of receivables that a company does not expect to collect and thus writes off as a loss in its accounting records.
- Learn the theoretical and operational framework for accounting for doubtful accounts.
- Understand the techniques for calculating bad debts expense, encompassing both the allowance and direct write-off methods.
- Gain insight into utilizing aged receivables for the estimation of allowances for doubtful accounts.
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Learning Objectives
- Learn the theoretical and operational framework for accounting for doubtful accounts.
- Understand the techniques for calculating bad debts expense, encompassing both the allowance and direct write-off methods.
- Gain insight into utilizing aged receivables for the estimation of allowances for doubtful accounts.
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