The unadjusted trial balance of Conrad ltée included the following information:

Cash sales: $250...

Question

The unadjusted trial balance of Conrad ltée included the following information:
 
Cash sales: $250 000
Credit sales: $600 000
Accounts receivable: $160 000
 
Prepare the journal entries to adjust the Allowance for doubtful accounts (A.F.D.A.) account under each of the following situations:

The estimated bad debts are 2.5% of credit sales and the A.F.D.A. account has a $2500 debit balance. 
The estimated bad debts are 3% of accounts receivable and the A.F.D.A. account has a $2500 credit balance.
The estimated bad debts are 3% of accounts receivable and the A.F.D.A. account has a $2500 debit balance.

(1/2/3 SEPARATED)

Robert · Accepted Answer

Journal entries to adjust Allowance for doubtful accounts:
1. The estimated bad debts are 2.5% of credit sales and the AFDA account has $2500 debit balance:
Estimated bad debts: 2.5% * 600000 = $15000.
Add: Debit balance of AFDA account = $ 2500
Total allowance to be created = $ 17500
Journal entry:

The unadjusted trial balance of Conrad ltée included the following information: Cash sales: $250 000 Credit sales: $600 000 Accounts receivable: $160 000 Prepare the journal entries to adjust the...

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