A Company Had the Following Items and Amounts in Its

question 161

Essay

A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year:
$\begin{array}{|l|l|r|}\hline &{\text { Debit }} &{\text { Credit }} \\\hline \text { Cash sales } & & \$ 88,000 \\\hline \text { Credit sales } & & 275,000 \\\hline \text { Accounts receivable } & \$ 96,000 & \\\hline \text { Allowance for doubtful accounts } & & 1,000 \\\hline\end{array}$ Prepare the adjusting entry to estimate bad debts under each of the following separate situations.
a. Bad debts are estimated to be 2.5% of credit sales.
b. An aging analysis estimates that 8% of the outstanding accounts receivable will be uncollectible.

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Definitions:

Explanatory Variables

are variables in a statistical model that are presumed to influence or cause changes in a dependent variable.

Significant Individually

Refers to the condition when an individual variable or factor is statistically significant on its own within a model or experiment.

Annual Income

The total amount of income received in a year from all sources before taxes and other deductions.

Square Foot

A unit of area measurement equal to the area of a square with sides of one foot in length.