On December 31, 2023, 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, 2023, will become uncollectible.

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31, 2023 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, 2023 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.

Transcribed Image Text:

Account Accounts receivable.......... Allowance for doubtful accounts.... Sales ($2,850,000 cash sales)......... Debit $2,100,000 33,000 Credit $11,400,000