Question

During 2018, its first year of operations, Pave Construction provides services on account of $154,000. By the end of 2018, cash collections on these accounts total $107,000. Pave estimates that 25% of the uncollected accounts will be bad debts. Record the adjustment for uncollectible accounts on December 31, 2018.

Answer 1

Answer:

Bad debts expenses                                        Debit                $ 11,750

Allowance for uncollectible receivables        Credit                                $ 11,750

Explanation:

The allowance for uncollectible accounts receivables balances are calculated as a percentage of the receivable balance.

The receivable balances as at December 31, 2018 is

Services provided on account                          $  154,000

Cash collections received                                 $  107,000

Receivables from services uncollected           $    47,000

Estimated percentage considered uncollectible     25 %

Allowance for uncollectible accounts   $ 47,000 * 25 % = $ 11,750