Estimating Bad Debts
Accounts Receivable of the Chalet Housing Co. on December 31, 2013, had a balance of $550,000. Allowance for Bad Debts had a $4,500 debit balance. Sales in 2013 were $3,450,000 less sales discounts of $51,000. Give the adjusting entry for estimated Bad Debt Expense under each of the following independent assumptions.
1. Of 2013 net sales, 1.5% will probably never be collected.
2. Of outstanding accounts receivable, 8% are doubtful.
3. An aging schedule shows that $41,000 of the outstanding accounts receivable are doubtful.