Comparison of Bad Debt Estimation Methods The following information (prior to adjustment) is available from the accounting records of the Bradford Company on December 31, 2010: Required Prepare journal entries to record the estimate of Bradford’s bad debt expense for 2010 assuming: 1. Bad debts are estimated to be 1.5% of total sales (net). 2. Bad debts are estimated to be 2% of net credit sales. 3. Bad debts are estimated to be 5% of gross accounts receivable.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Comparison of Bad Debt Estimation Methods The following information (prior to adjustment) is available from the accounting records of the Bradford Company on December 31, 2010:
Required
Prepare journal entries to record the estimate of Bradford’s bad debt expense for 2010 assuming:
1. Bad debts are estimated to be 1.5% of total sales (net).
2. Bad debts are estimated to be 2% of net credit sales.
3. Bad debts are estimated to be 5% of gross accounts receivable.
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