Prepare the adjusting entry

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Reference no: EM135612

Santana Rey, owner of Business Solutions, realizes that she requires to start accounting for bad debts expense. Consider that Business Solutions has total revenues of $60,000 during the first three months of 2012, and that the Accounts Receivable balance on 31^st March, 2012, is $22,367.

Required:

1a. Prepare the adjusting entry needed for Business Solutions to recognize bad debts expense, which are estimated to be 1% of total revenues on 31^st March, 2012 (Suppose a zero unadjusted balance in the Allowance for Doubtful Accounts at March 31).

Date General Journal Debit Credit

Mar. 31, 2012

1b. Organize the adjusting entry needed for Business Solutions to recognize bad debts expense, which are estimated to be 2 percent of accounts receivable on 31^st March, 2012 (Suppose a zero unadjusted balance in the Allowance for Doubtful Accounts at March 31).

Date General Journal Debit Credit

Mar. 31, 2012

2.Suppose that Business Solutions' Accounts Receivable balance at June 30, 2012, is $20,600 and that one account of $97 has been written off against the Allowance for Doubtful Accounts since 31^st March, 2012. If S. Rey uses the method prescribed in Part 1b, what adjusting journal entry must be made to identify bad debts expense on 30^th June, 2012?

Reference no: EM135612

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