required information the following information applies to the questions displayed below. at december 31…
required information the following information applies to the questions displayed below. at december 31, hawke company reports the following results for its calendar year. cash sales $ 560,000 credit sales $ 1,400,000 in addition, its unadjusted trial balance includes the following items. accounts receivable $ 756,000 debit allowance for doubtful accounts $ 7,600 debit 2. bad debts are estimated to be 3% of credit sales. show how accounts receivable and the allowance for doubtful accounts appear on its december 31 balance sheet. current assets: accounts receivable $ 756,000 less: allowance for doubtful accounts $ 756,000
Answer
Explanation:
Step1: Calculate bad - debt expense
Bad - debt expense is 3% of credit sales. Credit sales are $1,400,000. So, bad - debt expense = $1,400,000×0.03=$42,000$.
Step2: Calculate adjusted allowance for doubtful accounts
The unadjusted allowance for doubtful accounts has a debit balance of $7,600. After recording the bad - debt expense, the adjusted allowance for doubtful accounts balance = $42,000 - 7,600=$34,400$ (credit balance).
Answer:
| Current assets | |
|---|---|
| Accounts receivable | $756,000$ |
| Less: Allowance for doubtful accounts | $34,400$ |