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Home/ Questions/At December 31, Hawke Company reports the following results for its calendar year...
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ptntuto
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ptntuto
Asked: April 13, 20222022-04-13T06:31:15+00:00 2022-04-13T06:31:15+00:00In: Accounting

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

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..3..

At December 31, Hawke Company reports the following results for its calendar year:
Cash sales $1,905,000
Create sale $5,682,000

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..4..

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

Accounts receivable $1,270,100 debit
Allowance for doubtful accounts. $16,580 debit

Required:

1. Prepare the adjusting entry for this company to recognize bad debts under each of the following index- pendent assumptions.

a. Bad debts are estimated to be 1.5% of credit sales.

b. Bad debts are estimated to be 1% of total sales.

c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet gave the facts in part 1a.

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2015, balance sheet given the facts in part 1c.

Revelant knowledge

A bad debt is an account receivable that has not been paid by the customer. When credit is offered to customers, bad debts are possible. They occur when a business lends too much credit to a consumer who is unable to repay the debt, resulting in late, reduced, or missed payments.

bad debts
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    Robert Jones
    2022-04-13T06:31:17+00:00Added an answer on April 13, 2022 at 6:31 am

    1a) 

    Date Account and explanation Debit Credit
    Bad debt expense   $85230
    Allowance for doubtful accounts ( $5682000 x 1.5%)  $85230

    1b) 

    Date Account and explanation Debit Credit
    Bad debt expense   $75870
    Allowance for doubtful accounts [( $1905000 +  $5682000) x 1%]  $75870

    1c) 

    Date Account and explanation Debit Credit
    Bad debt expense   $80085
    Allowance for doubtful accounts [( $1270000 x 5%) +  $16580]  $80085

    2) 

    Current assets
    Account receivable  $1270100
    Less; Allowance for doubtful accounts ( $85230 – $16580)  $68650  $1201450

    3) 

    Current assets
    Account receivable $1270100
    Less; Allowance for doubtful accounts ($80085 – $16580)  $63505 $1206595
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