Please explain how to determine the effect on the balance sheet formula given the below problem.During the current year, Sun Electronics, Incorporated, recorded credit sales of $5,000,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. a. On November 13 of the current year, an account receivable for $98,000 from a prior year was determined to be uncollectible and was written off.b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year.Required:Show the effects of the above transactions on the following categories: Assets, Liabilities, and Stockholders' Equity. Indicate the accounts affected and enter decreases to account categories with a minus sign.      TransactionAssets Liabilities Stockholders’ Equity a.Allowance for doubtful accounts98,000Allowance for doubtful accounts100,000Cost of goods sold4,902,000 Accounts receivable98,000    b.Allowance for doubtful accounts100,000

Question
Asked Oct 2, 2019

Please explain how to determine the effect on the balance sheet formula given the below problem.

During the current year, Sun Electronics, Incorporated, recorded credit sales of $5,000,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales.

 

a. On November 13 of the current year, an account receivable for $98,000 from a prior year was determined to be uncollectible and was written off.

b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year.


Required:

Show the effects of the above transactions on the following categories: Assets, Liabilities, and Stockholders' Equity. Indicate the accounts affected and enter decreases to account categories with a minus sign.

 

 
 
 
 
 
Transaction Assets   Liabilities   Stockholders’ Equity  
a. Allowance for doubtful accounts 98,000 Allowance for doubtful accounts 100,000 Cost of goods sold 4,902,000
  Accounts receivable 98,000        
b. Allowance for doubtful accounts 100,000        
             
 
 

 

 

check_circleExpert Solution
Step 1

Effect of the given transac...

Liabilities+
Stockholder's Equity
Transaction
Assets
|Accounts Receivable
Allowance for Doubtful
Accounts
Allowance for Doubtful-100000
98000
а.
98,000
Bad debt
b.
-100000
Accounts
expense
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Liabilities+ Stockholder's Equity Transaction Assets |Accounts Receivable Allowance for Doubtful Accounts Allowance for Doubtful-100000 98000 а. 98,000 Bad debt b. -100000 Accounts expense

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