Elburn Company

Elburn Company - E9-2 The ledger of Elburn Company at the...

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E9-2 The ledger of Elburn Company at the end of the current year shows Accounts Receivable \$110,000, Sales \$840,000, and Sales Returns and Allowances \$28,000. Instructions (a) If Elburn uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Elburn determines that Copp's \$1,400 balance is uncollectible. (b) If Allowance for Doubtful Accounts has a credit balance of \$2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 10% of accounts receivable. (c) If Allowance for Doubtful Accounts has a debit balance of \$200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable. Explanation: When Bad Debts are estimated as a percentage of Sales: Net Sales = \$840,000 - \$28,000 = \$812,000 To estimate Bad Debts: 1) Multiply the amount of net sales by the percentage (\$812,000 × 0.01) = \$8,120 The entry to record that estimation would be:

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