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

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

Required
1. Prepare the adjusting entry on the books of Stilton Service Company to estimate bad debts under each of the following independent assumptions:
a. Bad debts are estimated to be 3% of credit sales.
b. An analysis suggests that 6% 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:
Would you recommend to Stilton that it use the income statement or the balance sheet approach to estimate uncollectible accounts receivable? Explain why, identifying advantages and disadvantages for each approach.

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...
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Related Book For  book-img-for-question

Fundamental Accounting Principles

ISBN: 978-0071051507

Volume I, 14th Canadian Edition

Authors: Larson Kermit, Tilly Jensen

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