Answer:
a. Dr Bad debt expense $1,617
Cr Allowance for doubtful debt $1,617
b. Dr Bad debt expense $2,205
Cr Allowance for doubtful debt $2,205
Explanation:
When a company makes sales on account, debit accounts receivable and credit sales. Based on assessment, some or all of the receivables may be uncollectible.
To account for this, debit bad debit expense and credit allowance for doubtful debt. Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.
Estimated uncollectible amount
= 5% × $49,000
= $2,450
As such, if the allowance for doubtful;
has a $833 credit balance before the adjustment
Additional allowance required
=$2450 - $833
= $1,617
Entries required are
Dr Bad debt expense $1,617
Cr Allowance for doubtful debt $1,617
b) a $245 debit balance before the adjustment.
This means that off the amount uncollectible $245 has already gone bad
Adjusting entries required amounts to
= $2450 - $245
= $2205
Dr Bad debts expense $2205
Cr Allowance for doubtful debt $2205
