Entries for Bad Debt Expense

question 138

Essay

Entries for bad debt expense.
The trial balance before adjustment of Risen Company reports the following balances:


Instructions

(a) 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.
(b) 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)?
(c) What is the theoretical justification for each of the two allowance methods used to estimate bad debts?

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Definitions:

Zygote

A fertilized egg cell that results from the union of a female gamete (egg) with a male gamete (sperm).

Concrete Operations

a stage in Jean Piaget's theory of cognitive development during which children gain the ability to think logically about concrete events.

Preoperational

A stage in Piaget's theory of cognitive development, occurring roughly between the ages of 2 and 7, characterized by symbolic thinking, egocentrism, and a lack of operational thought.

Sensorimotor

A developmental stage in early childhood, as proposed by Piaget, where children learn about and experience the world primarily through their senses and motor actions.