Entries for estimated bad debts assuming doubtful accounts

Reference no: EM13155009

The trial balance before adjustment of Risen Company reports the following balances:

Dr. Cr.
Accounts receivable $100,000
Allowance for doubtful accounts $ 2,500
Sales (all on credit) 750,000
Sales returns and allowances 40,000

Instructions:

(a) Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 6% of gross accounts receivable and (2) 1% of net sales.

(b) Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $2,500 instead of a credit balance. How will this difference affect the journal entries in part (a)?

Reference no: EM13155009

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