Answer and Explanation
Given:
Accounts receivable balance = $598,000
Percentage of receivables that are uncollectible = 5% or 0.05
Uncollectible receivables = 0.05 × 598,000 = $29,900
Adjusting journal entry to record bad debt expense is:
Particulars Debit Credit
Bad debts expense XXXXX
Allowance for doubtful debts XXXXX
(Being bad debts incurred)
Noe, Allowance for doubtful debts has a credit balance of $4,800.
Bad debt incurred = 29,900 - 4,800 = $25,100
So adjusting entry :
Particulars Debit Credit
Bad debts expense $25,100
Allowance for doubtful debts $25,100
(Being bad debts incurred)
