The December 31, 2013 balance sheet of Sauder Company had Accounts Receivable of ₤500,000 and a credit balance in Allowance for Doubtful Accounts of ₤33,000. During 2014, the following transactions occurred: sales on account ₤1,300,000; sales returns and allowances, ₤50,000; collections from customers, ₤1,215,000; accounts written off ₤35,000; previously written off accounts of ₤5,000 were collected.
Instructions
(a) Journalize the 2014 transactions.
(b) If the company uses the percentage-of-sales basis to estimate bad debts expense and anticipates 2% of net sales to be uncollectible, what is the adjusting entry at December 31, 2014?
(c) If the company uses the percentage-of-receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 4% of accounts receivable, what is the adjusting entry at December 31, 2014?
(d) Which basis would produce a higher net income for 2014 and by how much?

Question

Quizplus · Accepted Answer

The Answer of The December 31, 2013 balance sheet of Sauder Company had Accounts Receivable of ₤500,000 and a credit balance in Allowance for Doubtful Accounts of ₤33,000. During 2014, the following transactions occurred: sales on account ₤1,300,000; sales returns and allowances, ₤50,000; collections from customers, ₤1,215,000; accounts written off ₤35,000; previously written off accounts of ₤5,000 were collected.
Instructions
(a) Journalize the 2014 transactions.
(b) If the company uses the percentage-of-sales basis to estimate bad debts expense and anticipates 2% of net sales to be uncollectible, what is the adjusting entry at December 31, 2014?
(c) If the company uses the percentage-of-receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 4% of accounts receivable, what is the adjusting entry at December 31, 2014?
(d) Which basis would produce a higher net income for 2014 and by how much?

The December 31, 2013 Balance Sheet of Sauder Company Had