| At December 31, Folgeys Coffee Company reports the following results for its calendar year. |
| Cash sales | $ | 903,000 |
| Credit sales | 303,000 | |
| Its year-end unadjusted trial balance includes the following items. |
| Accounts receivable | $ | 128,000 | debit |
| Allowance for doubtful accounts | 5,300 | debit | |
Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (a) 6% of credit sales, (b) 4% of total sales and (c) 9% of year-end accounts receivable.
| |
| a. |
| Bad debts expense $303,000 × 0.06 = $18,180 |
| b. |
| Bad debts expense [($303,000 + $903,000) × 0.04] = $48,240 |
c.Bad debts expense:
| Unadjusted balance | $ | 5,300 | debit |
| Estimated balance ($128,000 × 9%) | 11,520 | credit | |
| Required adjustment | $ | 16,820 | credit |
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