Question

Bad Debt Expense info:Allowance for Doubtful Accounts has a credit balance of $1,000. Credit sales are $500,000. Cash sales are $500,000. Percentage of Sales Method is based on 5% of net credit sales. Aging Schedule shows that $25,000 is uncollectible. Accounts Receivable $200,000.Journalize adjusting entry--Aging Schedule or Percentage of Accounts Receivable.

Answer 1

Answer:

Bad Debt Expense $24,000 Dr

Allowance for Doubtful Accounts $24,000 Cr

Explanation:

Data:

BB = Beginning Balance = $1,000

CS = Credit Sales = $500,000

CH = Cash Sales = $500,000

SM = Percentage Sales Method = 5% = 0.05

U = Uncollectible = $25,000

AR = Accounts Receivable = $200,000

ADA = Allowance for Doubtful Accounts = ?

Calculations:

ADA = U - BB = $25,000 - $1,000 = $24,000

Net Realizable Cash Value = AR - ADA = $200,000 - $24,000 = $176,000

Balance in the Allowance Account after the adjusting entry = BB + ADA = $1,000 + $24,000 = $25,000

Journal entry:

Bad Debt Expense $24,000 Dr

Allowance for Doubtful Accounts $24,000 Cr

Hope this helps!