Problem 2 (11 points)

The accounts receivable balance for Hawk Corporation is $6,400,000 as of October 31, 2021. Before calculating and recording the months bad debt expense, there is a credit balance in the Allowance for Doubtful Accounts of $100,000. October 2021 net sales were $48,000,000. In the past several years, 1% of net sales have proven uncollectible. An aging of accounts receivable results in a $520,000 estimate for the Allowance for Doubtful Accounts as of October 31, 2021.

PART A: PERCENT OF SALES METHOD

Assume that Hawk Corporation uses the percent of sales method to estimate future uncollectible accounts.

• What adjusting entry does Hawk make to record October 2021 Bad Debt Expense?

• What is Accounts Receivable, net on Hawks October 31, 2021 Balance Sheet? $___________

• What is Bad Debt Expense on Hawks October 2021 Income Statement? $___________

PART B: ANALYSIS OF RECEIVABLES METHOD

Assume that Hawk Corporation instead uses the analysis of receivables method to estimate future uncollectible accounts.

• What adjusting entry does Hawk make to record October 2021 Bad Debt Expense?

• What is Accounts Receivable, net on Hawks October 31, 2021 Balance Sheet? $___________

• What is Bad Debt Expense on Hawks October 2021 Income Statement? $__________