On December 31, 2020, Corotel Companys year-end, the unadjusted trial balance included the following items:...
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Accounting
On December 31, 2020, Corotel Companys year-end, the unadjusted trial balance included the following items:
Account
Debit
Credit
Accounts receivable
$
2,080,000
Allowance for doubtful accounts
31,000
Sales ($2,700,000 cash sales)
$
10,800,000
1. Prepare the adjusting entry needed in Corotels books to recognize bad debts under each of the following independent assumptions.
a. Bad debts are estimated to be 2% of credit sales.
b. An analysis suggests that 5% of outstanding accounts receivable on December 31, 2020, will become uncollectible.
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31, 2020 balance sheet given the facts in requirement 1(a).
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31, 2020 balance sheet given the facts in requirement 1(b).
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