Solution-Estimate bad debts expense and anticipates

Estimate bad debts expense and anticipates

Reference no: EM132520095

Question - The December 31, 2018 balance sheet of Muhammad Ltd had Accounts Receivable of $400,000 and a credit balance in Allowance for Doubtful Accounts of $32,000. During 2019, the following transactions occurred: sales on account $1,500,000; sales returns and allowances, $50,000; collections from customers, $1,250,000; accounts written off $36,000; previously written off accounts of $6,000 were collected.

Instructions -

(a) Journalize the 2019 transactions.

(b) If the company uses the percentage of sales basis to estimate bad debts expense and anticipates 3% of net sales to be uncollectible, what is the adjusting entry at December 31, 2019?

(c) If the company uses the percentage of receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 8% of accounts receivable, what is the adjusting entry at December 31, 2019?

(d) Which basis would produce a higher net income for 2019 and by how much?

Reference no: EM132520095

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Estimate bad debts expense and anticipates

Reference no: EM132520095

Reference no: EM132520095

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