Prepare all of the necessary year-end adjusting entries

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Question - At December 31 of the current year, which is the fiscal year-end of Penguins Incorporated, the following balances appeared in the general ledger, prior to adjusting entries:

Accounts Receivable $110,000 DR

Allowance for doubtful accounts 2,000 CR

Sales Revenue (1/2 of this total = credit sales) 400,400 CR

Sales Returns & Allowances (1/2 of this total relates to credit sales) 10,400 DR

Included in the Accounts Receivable are accounts to be written off in the amount of $2

(a) Prepare all of the necessary year-end adjusting entries under the assumption that it is estimated that two percent of outstanding customer receivables will not be collected.

(b) If bad debts are estimated to three-quarters of two percent (.015) of NET credit sales, indicate how your answer to part (1) would change - just prepare the journal entry that would change!

Show how "Receivables" will be disclosed on the balance sheet as at December 31 for both parts (a) and (b).

Reference no: EM132540203

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