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1.
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Assume Cross uses 1/2 of 1 percent ofsales to estimate its bad debt expense for the year. Prepare theadjusting journal entry required at December 31, 2010, forrecording Bad Debt Expense. (TIP: The percentage of credit salesmethod directly calculates Bad Debt Expense.)
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2.
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Assume instead that Cross uses the aging of accounts receivablemethod and estimates that $1,005,000 of Accounts Receivable will beuncollectible. Prepare the adjusting journal entry required atDecember 31, 2010, for recording bad debt expense. (TIP: The agingof accounts receivable method focuses on calculating what theadjusted Allowance for Doubtful Accounts balance should be. Youneed to consider the existing balance when determining theadjustment.)
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