At December 31, 2010, Aaliyah Company reports the following results for its cale
ID: 2459586 • Letter: A
Question
At December 31, 2010, Aaliyah Company reports the following results for its calendar year.
In addition, its unadjusted trial balance includes the following items
Requirement 1:Prepare the adjusting entry to recognize bad debts under each of the following independent assumptions
a) Bad debts are estimated to be 4% of credit sales
b) Bad debts are estimated to be 3% of total sales
c) An aging analysis estimates that 7% of year-end accounts receivable are uncollectible
*options for debit sides: Allowances for Doubtful Accounts, Sales Expense and Allowance, Accounts Receivable, Bad Debt Expense, Accounts Payable
*options for credit sides: Sales, Cash, Allowance for doubtful Accounts, Accounts Receivable, Bad Debts Expense
Reqirement 2: Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its Dec 31, 2010 balance sheet given the facts in requirement 1a
Requirement 3: Show how the accounts receivable and the allowance for doubtful accounts appear on its dec 31, 2010 partial balance sheet given the facts in requirement 1c
*same partial balance sheet set-up as requirement 2
Cash Sales 2112110 Credit sales 3920000Explanation / Answer
Adjusting entries:
a. 3,920,000 x 4% + 18,100 = $ 174,900
b. 6,032,110 x 3% + 18,100 = $ 199,063
c. 1,187,760 x 7% + 18,100 = $ 101,243
Partial balance sheet:
Adjusting entry # Account Title Debit Credit $ $ a. Bad debt expense 174,900 Allowance for doubtful accounts 174,900 b. Bad debt expense 199,063 Allowance for doubtful accounts 199,063 c. Bad debts expense 101,243 Allowance for doubtful accounts 101,243