Question

During the current year, Adams Assembly, Inc., recorded credit sales of $1,300,000. Based on prior experience, it estimates a 1 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 $4,000 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:

a. Debit Allowance for doubtful debt $4,000

   Credit Accounts receivable.      $4,000

Being entries to write off debt that had been provided for.

b. Debit bad debit expense                      $13,000

   Credit Allowance for doubtful debt       $13,000

Being entries to record bad debt expense for the current year.

Explanation:

When a company makes sales on account, debit accounts receivable and credit sales.

Based on assessment, some or all of the receivables may be uncollectible.  

To account for this, debit bad debit expense and credit allowance for doubtful debt.

Should the debt become uncollectible (i.e go bad), debit allowance for doubtful debt and credit accounts receivable.

Bad debt = 1% * $1,300,000

= $13,000