Problem
Assume that a company's bad debts are estimated and recorded as 2% of Accountreceivable.
Accounts receivable .... $125000
Sales revenue............$1280000
Previous balance of Allowance for doubtful accounts ..... $1600
75% of sales was made on credit.
a. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appearon the balance sheet after adjustment.
b. Prepare the entry to write off a $1,500 account receivable on January 1 of the next year.
c. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appearon the balance sheet immediately after writing off the account in part 2.