00:01
In this example, we've been asked to prepare the adjusting entry to record bad debts under each separate assumption.
00:08
The first assumption, bad debts are estimated to be 1 .5 % of credit sales.
00:15
The second, they're estimated to be 1 % of total sales.
00:20
And the last, an aging analysis estimates 5 % of year end accounts receivable is uncollected.
00:30
Now, in the question that was posed, they didn't tell us what credit sales, total sales, or accounts receivable were.
00:38
And to answer this question, you need that information.
00:41
However, i can still answer it for you, but i'm going to have to provide an example of what these values are to base it off of.
00:49
And then you could follow the same steps if you were provided the numbers.
00:53
Let's say we have cash sales of 400 ,000, credit sales of 600 ,000, which would get me total sales of 1 ,000.
01:00
Million.
01:01
And for this example, let's say we have accounts receivable of 500 ,000.
01:06
Let's work with scenario one first, where bad debts are estimated to be 1 .5 % of credit sales.
01:15
So that means i would multiply this 600 ,000 times 0 .015...