Question 2: BASES USED FOR THE ALLOWANCE METHOD

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Question 2: BASES USED FOR THE ALLOWANCE METHOD . Companies use one of two methods in the estimation of uncollectible: 1- Percentage of sales (uncollectible accounts = 10 % of sales) 2- Percentage of receivable (uncollectible accounts -2% of receivables) Both bases are GAAP; the choice is a management decision. Percentage of Sales: Assume that Gonzales Company elects to use the percentage of sales basis. It concludes that I percent of net credit sales will become uncollectible. If net credit sales for 2005 are $800,000. What are the bad debt expense, and the adjusting entry Bad debt expense debit) Assume that SSU Company elects to use the percentage of sales basis. It concludes that 2 percent of net credit sales will become uncollectible. If sales for $2005 are 425,000 S and sales returns $ 25,000. What are the bad expense, and the adjusting entry. Bad debt expense 2. Percentage of Receivables Assume that Gonzales Company elects to use the percentage of receivable basis. It concludes that 1% percent of account receivable will become uncollectible. If account receivable for 2005 are 300,000. What are the bad debt expense, and the adjusting entry Bad debt expense Assume that Acer Company clects to use the percentage of receivable basis. It concludes that 2 percent of account receivable will become uncollectible. If account receivable for 2005 are 800,000. What are the bad debt expense, and the adjusting entry Bad debt expense