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Vlad [161]
3 years ago
13

Blue Spruce Corp. uses the percentage-of-receivables basis to record bad debt expense and concludes that 2% of accounts receivab

le will become uncollectible. Accounts receivable are $402,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,723. Prepare the adjusting journal entry to record bad debt expense for the year.
Business
1 answer:
dedylja [7]3 years ago
6 0

Answer:

The adjusting journal entry would be:

Debit: Bad debts expense $5,317

Credit: Allowance for Doubtful Accounts $5,317

Explanation:

Debit: Bad debts expense $5,317

Credit: Allowance for Doubtful Accounts $5,317

Explanation of the entry:

Allowance for doubtful debts at the end of the year = $402,000 × 2% = $8,040

Credit balance at the start = $2,723

Allowance for doubtful accounts = $8,040 - $2,723 = $5,317

The Allowance for Doubtful Accounts presently has a credit balance of $2,723 and allowance for doubtful debt at the end of year is $8,040, you need to enter an additional credit amount of $5,317 into the Allowance for Doubtful Accounts. The other part of this adjusting entry will be a debit of $5,317 to Bad Debts Expense.

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2 years ago
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frez [133]

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