As of December 31, 2011, the Ethan Company reports the following results for its calendar year.

Cash sales.....$1,803,750

Credit sales.....$3,534,000

In addition, your unadjusted trial balance includes the following items.

Accounts receivable.....$1,070,100 debit

Allowance for doubtful accounts....$15,750 debit

 Required

1. Prepare the following entry for this company to recognize bad debts under each of the following independent assumptions.

1. a) Bad debts are estimated at 2% of credit sales.
2. b) An aging analysis estimates that 5% of the accounts receivable at the end of the year are uncollectible.
3. 
   
4. 2. Show how Accounts Receivable and Allowance for Doubtful Accounts appear on your balance sheet as of December 31, 2011, given the facts in part 1a.
5. 
   
6. 3. Show how Accounts Receivable and Allowance for Doubtful Accounts appear on your balance sheet as of December 31, 2011, given the facts in part 1b.

Answer rating: 100% (QA)

1a The entry to recognize bad debts estimated at 2 of credit sales would be Bad Debt Expense 70680 A... View the full answer