Question:

Accounting help.... am i doing this right???

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Total credit sales $2,211,190

Accounts receivable at December 31 828,320

Bad debts written off 33,207

1. Assume that Jems Company estimates its bad debts expense to be 2% of credit sales. What amount of bad debts expense will Jems record if it has an Allowance for Doubtful Accounts credit balance of $7,111?

.02 * $2,211,190 = 44223.8

then 44223.8 – 7111 = 37112.8 is this the correct?

2. Assume that Jems Company estimates its bad debts expense based on 7% of accounts receivable. What amount of bad debts expense will Jems record if it has an Allowance for Doubtful Accounts credit balance of $3,131?

.07 * 2,211,190 = 154783.3

then 154783.3 – 3131 = 151652.3 is this correct?

3. Assume the same facts as in previous question, except that there is a $3,131 debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Jems record?

.07 * 2,211,190 = 154783.3

then 154783.3 + 3131 = 157914.3 is this correct?

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  1. 1. Assume that Jems Company estimates its bad debts expense to be 2% of credit sales. What amount of bad debts expense will Jems record if it has an Allowance for Doubtful Accounts credit balance of $7,111?

    .02 * $2,211,190 = 44223.8

    then 44223.8 – 7111 = 37112.8 is this the correct?

    No. If you're using %age of credit sales method, it's 2% of credit sales flat, i.e. $44223.80. You ignore any bal. in the allowance acct.

    2. Assume that Jems Company estimates its bad debts expense based on 7% of accounts receivable. What amount of bad debts expense will Jems record if it has an Allowance for Doubtful Accounts credit balance of $3,131?

    .07 * 2,211,190 = 154783.3

    then 154783.3 – 3131 = 151652.3 is this correct?

    No. 7% of AR = 7% x $828,320 = $57,982.40. But you already have a credit bal. of $3131, so all you need is $54851.40.

    3. Assume the same facts as in previous question, except that there is a $3,131 debit balance in Allowance for Doubtful Accounts. What amount of bad debts expense will Jems record?

    .07 * 2,211,190 = 154783.3

    then 154783.3 + 3131 = 157914.3 is this correct?

    No. 7% of AR = 7% x $828,320 = $57,982.40. And you have a debit bal. of $3131, so you need $61113.40.

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