Question

Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $137,500, and it estimates that 3% will be uncollectible.
Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has:


(a) a $2,338 credit balance before the adjustment.


(b) a $688 debit balance before the adjustment.

Answer 1

Answer:

a)

Dr Bad debts expense 1,787

Cr Allowance for doubtful accounts 1,787

b)

Dr Bad debts expense 4,813

Cr Allowance for doubtful accounts 4,813

Explanation:

Mazie Supply Co. Journal entry

a)

Dr Bad debts expense 1,787

($4813-$2,338+$688)

($4,813-$3,036)

Cr Allowance for doubtful accounts 1,787

b)

Dr Bad debts expense 4,813

(3%×$137,500+$688)

($4125+$688)

Cr Allowance for doubtful accounts 4,813