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10E_c

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Financial & Managerial Accounting
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Short Answer

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

Cash sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $900,000

Credit sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000

Its year-end unadjusted trial balance includes the following items.

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . $125,000 debit

Allowance for doubtful accounts . . . . . . . . . . . . . . . . 5,000 debit

c. Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be 6% of year-end accounts receivable.

The amount of bad debt expense will be $12,500 when the organization assumes the uncollectible of 6% of year-end accounts receivables.

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Step by Step Solution

Journal entry

Date

Particulars

Debit

Credit

c

Bad debt expense

$12,500

Allowance for doubtful accounts

$12,500

(To record the bad debt)

Working notes

Particulars

Amount

Unadjusted balance

$5,000 debit

Add: Estimated balance

$7,500 credit

Required adjustment

$12,500 credit

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