Milano Entity (ME) based its 20X7 estimate for doubtful accounts on 2.5% of the average accounts receivable balance. Because of strong demand for ME's products, sales on account were much higher in the last quarter of 20X7 than they were in the previous three quarters. Management determined after reviewing year-end adjusting entries had been made that a more realistic estimate of collectible accounts should be based on the year-end balance in accounts receivable.
The average accounts receivable balance for 20X6 was 600,000 euros and the year-end balance was 710,000 euros. The average accounts receivable balance for 20X7 was 750,000 euros and the year-end balance was 980,000 euros. ME prepares comparative financial statements.
Provide any necessary adjusting entries.

Question

Milano Entity (ME) based its 20X7 estimate for doubtful accounts on 2.5% of the average accounts receivable balance. Because of strong demand for ME's products, sales on account were much higher in the last quarter of 20X7 than they were in the previous three quarters. Management determined after reviewing year-end adjusting entries had been made that a more realistic estimate of collectible accounts should be based on the year-end balance in accounts receivable. 
The average accounts receivable balance for 20X6 was 600,000 euros and the year-end balance was 710,000 euros. The average accounts receivable balance for 20X7 was 750,000 euros and the year-end balance was 980,000 euros. ME prepares comparative financial statements.
Provide any necessary adjusting entries.

Quizplus · Accepted Answer

The Answer of Milano Entity (ME) based its 20X7 estimate for doubtful accounts on 2.5% of the average accounts receivable balance. Because of strong demand for ME's products, sales on account were much higher in the last quarter of 20X7 than they were in the previous three quarters. Management determined after reviewing year-end adjusting entries had been made that a more realistic estimate of collectible accounts should be based on the year-end balance in accounts receivable. 
The average accounts receivable balance for 20X6 was 600,000 euros and the year-end balance was 710,000 euros. The average accounts receivable balance for 20X7 was 750,000 euros and the year-end balance was 980,000 euros. ME prepares comparative financial statements.
Provide any necessary adjusting entries.

Milano Entity (ME) Based Its 20X7 Estimate for Doubtful Accounts