Aaron Servicing showed the following partial unadjusted results at October 31, 2020, its year-end:

Part 1

Required

a. Assuming Aaron estimates bad debts to be 1.5% of sales, prepare the adjusting entry at October 31, 2020.

b. Show how accounts receivable would be shown on the October 31, 2020, balance sheet using your calculations in (a).

Part 2

Required

c. Instead of (a), assume that Aaron estimates bad debts to be 5% of outstanding accounts receivable. Prepare the adjusting entry at October 31, 2020.

d. Show how accounts receivable would be shown on the October 31, 2020, balance sheet using your calculations in (c).

Transcribed Image Text:

Debit Account Credit $1,650,000 Sales Accounts receivable. Allowance for doubtful accounts $148,000 3,200