Question

Bad Debt Expense: Percentage of Credit Sales Method Gilmore Electronics had the following data for a recent year: Cash sales $135,000 Credit sales 512,000 Accounts receivable determined to be uncollectible 9,650 The firm's estimated rate for bad debts is 2.2% of credit sales. Required:
I. Prepare the journal entry to write off the uncollectible accounts.
2. Prepare the journal entry to record the estimate of bad debt.
3. If Gilmore had written off $3,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed?

Answer 1

Answer:

allowance for bad debt 9,650 debit

           Account receivables 9,650 credit

bad debt expense     11,264 debit

       allowance for bad debt  11,264 credit

the bad debt expense would not change as it is not determnate based on the adjustment of an estimate uncollectible account but, in the percentage of sales which will fail to met the payment.

Explanation:

estimated bad debt:

512,000 x 2.2% = 11,264‬