A Company Had the Following Items and Amounts in Its

question 15

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:

Student T Distribution

A probability distribution that estimates the mean of a population by using a small sample size when the population variance is unknown.

Robust

Describes a system, model, or test that remains effective under a wide variety of conditions or assumptions.

Nonnormal

Refers to data distributions that do not follow a normal distribution, often characterized by skewness or a lack of symmetry.

Randomly Selected

A process of selection in which each member of a set has an equal probability of being chosen.