Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Management Posted 30 Dec 2017 My Price 8.00

Keegan Corporation

P7-8        Estimating Bad Debts An examination of the accounting records of the Keegan Corporation disclosed the following information  for 2007:

 

Cash sales

$680,000

Net credit sales

527,000

Accounts receivable (12/31/07)

190,000

Allowance for doubtful accounts (12/31/07, prior to adjustment)

1,500 (debit)

Keegan wishes to examine the effect of various alternative bad debt estimation policies.

Required

1.      Prepare the adjusting entry that would be required under each of the following methods:

a.    Bad debts are estimated at 1.4% of total sales (net).

b.   Bad debts are estimated at 3% of net credit sales.

c.    Bad debts are estimated at 7.5% of gross accounts receivable.

d.   An aging of accounts receivable indicates that half of the outstanding accounts will incur a 3% loss, a quarter will incur a 6% loss, the remaining quarter will incur a 20% loss.

2.      Discuss the difference between the income statement and balance sheet approaches to estimating bad debts.

 

Answers

Maurice Tutor
(5)
Status NEW Posted 30 Dec 2017 10:12 PM My Price 8.00

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