Question

At the end of the year, Mercy Cosmetics’ balance of Allowance for Uncollectible Accounts is $730 (debit) before adjustment. The balance of Accounts Receivable is $26,300. The company estimates that 13% of accounts will not be collected over the next year. What is the adjustment Mercy Cosmetics would record for Allowance for Uncollectible Accounts? (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.);

Answer 1

Answer:

Dr Bad debt expenses $4,149

Cr Allowance for uncollectible accounts $4,149

Explanation:

Dr Bad debt expenses $4,149

Cr Allowance for uncollectible accounts $4,149

13%×$26,300= $3,419

$3,419 +$730=$4,149

Answer 2

Answer:

A credit of $4,149 adjustment is required in allowance for uncollectible accounts

Explanation:

The amount that should be posted to allowance for uncollectible accounts in the year is computed thus:

$26,300*13% =$3,419.00   credit entry

The allowance for uncollectible account would look like this:

Dr Balance brought forward                                     $730

Dr Increase in the year                                              $3,419  

Adjustment required (balancing figure)                                $4,149

The adjustment Mercy Cosmetics would record for Allowance for uncollectible accounts is the balancing figure of $4,149 as shown above.

Find below alternative approach:

1) take 13% of accounts receivable of $26,300=($26,300*13%)=$3419

2) Add  the balance for the allowance of  uncollectible accounts debit($3419+$730)=$4149

3) debit bad dept expense for $4,149

4) credit allowance for uncollectible accounts $4,149