Starseekers,Inc

question 93

Essay

Starseekers,Inc.began the year with a $4,800 normal balance in Accounts Receivable and a credit balance in its Allowance for Doubtful Accounts of $546.Starseekers' sales were all on account and amounted to $41,800 during the year.Collections from customers amounted to $40,600 and the company wrote-off customer account balances totaling $500 during the year.
Required:
Part a.Using T-accounts,determine how much Starseekers' customers owe the company at year-end and the unadjusted balance in its Allowance for Doubtful Accounts account.
Part b.The company currently uses the percentage of credit sales method for determining its Bad Debt Expense.Historically,bad debts have approximated 3% of credit sales.Prepare the related adjusting entry and,using a T-account,determine the ending balance in the Allowance for Doubtful Accounts account.
Part c.Assume instead that the company uses the aging of accounts receivable method.This method resulted in an estimate of uncollectible accounts of $1,105.Prepare the related adjusting entry and,using a T-account,determine the ending balance in the Allowance for Doubtful Accounts account.

---

Definitions:

Utilitarianism

An ethical theory that suggests the best action is the one that maximizes utility, typically defined as that which produces the greatest well-being of the greatest number of people.

Moral Philosophy

The branch of philosophy dealing with values relating to human conduct, with respect to the rightness and wrongness of certain actions and to the goodness and badness of the motives and ends of such actions.

Ethical Behavior

Conducting oneself in a manner that adheres to principles of morality and fairness in all aspects of life, including business practices.

Hedonism

Hedonism is the ethical theory that pleasure (in the sense of the satisfaction of desires) is the highest good and proper aim of human life.