The December 31 2015 balance sheet of Barone Company had Accounts Receivable of $400000 and a credit balance in Allowance for Doubtful Accounts of $32000. During 2016 the following transactions occurred: sales on account $1500000; sales returns and allowances $50000; collections from customers $1250000; accounts written off $36000; previously written off accounts of $6000 were collected.
Instructions
(a) Journalize the 2016 transactions.
(b) If the company uses the percentage-of-sales basis to estimate bad debt expense and anticipates 3% of net sales to be uncollectible what is the adjusting entry at December 31 2016?
(c) If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 8% of accounts receivable what is the adjusting entry at December 31 2016?
(d) Which basis would produce a higher net income for 2016 and by how much?

Question

Quizplus · Accepted Answer

The Answer of The December 31 2015 balance sheet of Barone Company had Accounts Receivable of $400000 and a credit balance in Allowance for Doubtful Accounts of $32000. During 2016 the following transactions occurred: sales on account $1500000; sales returns and allowances $50000; collections from customers $1250000; accounts written off $36000; previously written off accounts of $6000 were collected.
Instructions
(a) Journalize the 2016 transactions.
(b) If the company uses the percentage-of-sales basis to estimate bad debt expense and anticipates 3% of net sales to be uncollectible what is the adjusting entry at December 31 2016?
(c) If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 8% of accounts receivable what is the adjusting entry at December 31 2016?
(d) Which basis would produce a higher net income for 2016 and by how much?

The December 31 2015 Balance Sheet of Barone Company Had