Question

During the current year, Witz Electric, Inc., recorded credit sales of $880,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. Required: Prepare journal entries for each transaction: (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) a. On September 29 of the current year, an account receivable for $2,500 from March of the current year was determined to be uncollectible and was written off. b. The appropriate bad debt expense adjustment was recorded for the current year.

Answer 1

Answer:Witz Electric journal $

Date

March

Provision for bad debt Dr 17,600

Receivables. Cr. 17,600

Narration provision for bad debt on receivables.

September 30

Receivable Dr 15,100

Provision for bad debt Cr 15,100

Narration. Adjustment for over provision for bad debts.

Explanation:

A provision for bad debt account is an estimate of receivables that are likely to go bad, in this vein the firm's makes provision for it .

The provision account is usually debited to the income statement and the receivable account credited to reduce the receivables.

If at the end of the period the amount of provision is greater than the actual bad debt as like in the above scenario, the provision account is credited with the difference and receivable account debited .

If on the other hand the actual bad debt is greater than the provision, the provision account is further debited with the difference and the receivable account credited.