Estimate bad debts and that their experience indicates

Reference no: EM133475099

Case: Company Atem makes most of its sales on account. In their most recent fiscal year, the company recorded sales of $5,230,000; during the year, they wrote off customer accounts in the amount of $147,000 as uncollectible. At the beginning of the year, the balance in Allowance for Doubtful Accounts was a credit of $90,000. At year-end, the balance in Accounts Receivable was $860,000.

REQUIRED:

Question 1: Assume that Atem uses the percentage of sales method to estimate bad debts and that their experience indicates that 2.8% of sales will turn out to be uncollectible. Prepare the adjusting entry to record bad debts.

Question 2: As a separate case, assume that T uses the percentage of receivables method and that they estimate 3.2% of outstanding receivables will become uncollectible. Prepare the adjusting entry in this case.

Reference no: EM133475099

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