On December 31, 2014, Corotel Company's year-end, the unadjusted trial balance included the following items: Required 1.

Question:

On December 31, 2014, Corotel Company's year-end, the unadjusted trial balance included the following items:

Required
1. Prepare the adjusting entry needed in Corotel's books to recognize bad debts under each of the following independent assumptions:
a. Bad debts are estimated to be 2% of credit sales.
b. An analysis suggests that 5% of outstanding accounts receivable on December 31, 2014, will become uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31, 2014, balance sheet given the facts in requirement 1(a).
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31, 2014, balance sheet given the facts in requirement 1(b).
Analysis Component: If bad debts are not adjusted for at the end of the accounting period, identify which GAAP are violated and why.

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...