At December 31, Hawke Company reports the following results for its calendar year. Cash sales $1,432,910
Credit sales $3,376,000

In addition, its unadjusted trial balance includes the following items.

Accounts receivable $1,022,928 debit
Allowance for doubtful accounts $11,560 debit

Required:
Prepare the adjusting entry for this company to recognize bad debts

The adjusting entries for acknowledging the bad debts would be:

a). Bad Debts Expense                  $50 640

Allowance for Doubtful Accounts                     $50 640

b). Bad Debts Expense                 $48089.1

Allowance for Doubtful Accounts                     $48089.1

Bad debts:

The key reasons for this could be:

The given amounts are obtained as follows:

a). Given that,

Bad debts is 1.5% of credit sales.

Credit Sales = $3,376,000

Bad debts = 1.5% of $3,376,000

∵ Bad debts = 1.5/100 * $3,376,000

= $50 640

b). Given that,

Bad debts = 1 % of total sales.

Total Sales = Credit sale + Cash sale

= $3,376,000 + $1,432,910

= $4808910

Bad debts = 1% of 4808910

∵ Bad debts = 1/100 * $4808910

= $48089.1

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