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Sather Ltd. had the following unadjusted account balances at December 31, 2015:
|
Accounts Receivable |
$150,000 |
|
Allowance for Doubtful Accounts |
3,000 |
|
Sales |
750,000 |
Required:
- Assume that Sather Ltd. estimated its uncollectible accounts at December 31, 2015 to be two per cent of sales.
- Prepare the appropriate adjusting entry to record the estimated uncollectible accounts at December 31, 2015.
- Calculate the balance in the Allowance for Doubtful Accounts account after posting the adjusting entry.
- Assume that Sather Ltd. estimated its uncollectible accounts at December 31, 2015 to be ten per cent of the net accounts receivable balance.
- Prepare the appropriate adjusting entry to record the estimated uncollectible accounts at December 31, 2015.
- Calculate the balance in the Allowance for Doubtful Accounts account after posting the adjusting entry.
- Why is there a difference in the calculated estimates of doubtful accounts in questions 1 and 2?
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