At the end of the current year, the accounts receivable account has a debit balance of $6,800,000 and sales for the year total $81,500,000

At the end of the current year, the accounts receivable account has a debit balance of $6,800,000 and sales for the year total $81,500,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:

a. The allowance account before adjustment has a debit balance of $68,250. Bad debt expense is estimated at 3⁄4 of 1% of sales.

b. The allowance account before adjustment has a debit balance of $68,250. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $575,000.

c. The allowance account before adjustment has a credit balance of $45,000. Bad debt expense is estimated at 1⁄2 of 1% of sales.

d. The allowance account before adjustment has a credit balance of $45,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $450,000.

Answer:

a. $611,250 ($81,500,000 × 0.0075) 

b. $643,250 ($575,000 + $68,250) 

c. $407,500 ($81,500,000 × 0.0050)

d. $405,000 ($450,000 – $45,000)