Question

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $31700. If the balance of the Allowance for Doubtful Accounts is $7560 debit before adjustment, what is the amount of bad debt expense for that period?

Answer 1

Answer:

The bad debt expense would be 39,260 for this period

Explanation:

We need to adjust the allowance to match the estimated uncollectible accounts:

31,700 estimated uncolelctible accounts

Allowance for Doubful Account current balance 7,560 debit

If we do the Allowance t account we would have something like this:

$\left[\begin{array}{cc}Debit&Credit\\7,700&Adjustment\\-&31700\end{array}\right]$

$Balance = credit - Debit$

So to get the adjustment, which is in the credit we will do:

$Balance + Debit = Credit$

$31,700 + 7,560 = 39,260$

Now to balance the entry on which we are crediting the allowance for 39,260 we need to recognize an expense for bad debt with the same ammount.