Allowance Method of Accounting for Bad DebtsComparison of the Two Approaches Kandel Company had the following data

Question:

Allowance Method of Accounting for Bad Debts—Comparison of the Two Approaches Kandel Company had the following data available for 2010 (before making any adjustments):

Accounts receivable, 12/31/10 ............$320,100

Allowance for doubtful accounts ..............2,600

Net credit sales, 2010 ................834,000

Required

1. Identify and analyze the adjustment to recognize bad debts under the following assumptions:

(a) Bad debts expense is expected to be 2% of net credit sales for the year and

(b) Kandel expects it will not be able to collect 6% of the balance in accounts receivable at year-end.

2. Assume instead that the balance in the allowance account is a negative $2,600. How will this affect your answers to (1)?

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...