A company ages its accounts receivables to determine its end of period adjustment for bad debts. at the end of the current year,

Question

3 years ago

14

A company ages its accounts receivables to determine its end of period adjustment for bad debts. at the end of the current year,

management estimated that $15,750 of the accounts receivable balance would be uncollectible. prior to any year-end adjustments, the allowance for doubtful accounts had a credit balance of $375. what adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Business

2 answers:

lakkis [162] · Answer 1 · 2022-03-14T08:36:14+03:00

Answer:

Debit Bad Debt expense $ 15,375

Credit Allowance fro doubtful accounts $ 15,375

Explanation:

For the purpose of recording of bad debts expense on objective basis (i.e. using receivables aging), the closing balance amount of uncollectible allowance is to be <u>maintained</u> at certain amounts and the entry in the books of accounts is passed with the differential of the amounts.

In the given question, the company needs to have a closing balance of allowance for doubtful accounts against the receivables amounting to $ 15,750. However, the same account already shows a balance of $ 375. Therefore, an entry shall be passed with the difference of the above amounts i.e. $ 15,750 - $ 375 = $ 15,375

denis-greek [22] · Answer 2 · 2022-03-14T07:18:27+03:00

denis-greek [22]3 years ago

3 0

<span>Bad Debt Expense: Debit; $16,125.00
Allowance for Doubtful Accounts: Credit; $16,125.00

$15,750.00 + $375.00 = $ 16,125.00</span>