In 2008, 3 years after it began operations, the Pearce Corporation decided to change from the direct

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In 2008, 3 years after it began operations, the Pearce Corporation decided to change from the direct write-off method of recording bad debts to estimating bad debts. The following information is available to you:

In 2008, 3 years after it began operations, the Pearce

Required
1. Prepare an analysis to determine Pearce€™s estimated bad debt expense percentage based upon the average relationship of actual bad debts to credit sales.
2. Prepare an analysis to determine Pearce€™s estimated percentage of allowance for doubtful accounts based on year-end accounts receivable.
3. What amount should Pearce record as bad debts expense for 2008 if:
a. Bad debts are estimated as a percentage of credit sales?
b. Allowance for doubtful accounts is estimated as a percentage of outstanding year-end accountsreceivable?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Intermediate Accounting

ISBN: 978-0324300987

10th Edition

Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones

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