At December 31,2016,a company's records include the following:
Required:
Part a.The company estimates bad debts as 1.3% of credit sales.Prepare the required adjusting entry to record Bad Debt Expense for the year.
Part b.Assume instead that the company uses the aging of receivables method.Its aging analysis reveals that the estimate of uncollectible receivables is $11,250.Prepare the required adjusting entry to record Bad Debt Expense for the year.
Part c.Assume instead that the company estimates that its Bad Debt Expense for the year is $8,250.Use a T-account to determine the adjusted balance in the Allowance for Doubtful Accounts.
Definitions:
Equity Theory
A theory in social psychology that explains how individuals perceive and react to fairness or unfairness in distribution of resources within their interpersonal relationships.
Job Security
The assurance or probability that an individual will keep their job without the risk of becoming unemployed.
Equity Theory
A theory of motivation that suggests individuals assess their job satisfaction based on the ratio of inputs to outcomes, compared to others.
Market Price
The price at which an item or service is traded in the competitive marketplace.
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