Task: Entries for bad debt expense
The trial balance before adjustment of Suarez Company reports the following balances:
Dr. Cr.
Accounts receivable $100,000
Allowance for doubtful accounts $2,500
Sales (all on credit) 750,000
Sales returns and allowances 40,000
Instructions:
Question 1: Prepare the entries for estimated bad debts assuming that doubtful accounts are estimated to be (1) 6% of gross accounts receivable and (2) 1% of net sales.
Question 2: Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $2,500 instead of a credit balance. How will this difference affect the journal entries in part (a)?