Problem 7-2A (Algo) Estimating and reporting bad debts LO P2, P3

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At December 31, Hawke Company reports the following results for its calendar year.

Cash sales	$ 50,000
Credit sales	$ 125,000

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

Accounts receivable	$ 112,500	debit
Allowance for doubtful accounts	$ 900	debit

Problem 7-2A (Algo) Part 1

Required:

1. Prepare the adjusting entry to record bad debts under each separate assumption.

1. Bad debts are estimated to be 4% of credit sales.
2. Bad debts are estimated to be 3% of total sales.
3. An aging analysis estimates that 4% of year-end accounts receivable are uncollectible.

Adjusting entries (all dated December 31).