Question

During its first year of operations, Crane Company had credit sales of $3,531,400; $664,000 remained uncollected at year-end. The credit manager estimates that $36,000 of these receivables will become uncollectible. Prepare the journal entry to record the estimated uncollectible. (Assume an unadjusted balance of zero in Allowance for Doubtful Accounts.) (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Answer 1

Answer:

Bad debt expense...................Dr       $36,000

            Allowance for doubtful debts                $36,000

(To record uncollectibles)

Explanation:

Certain amount of credit sales that the manager estimates to be uncollectible is called bad debts. They are written off at the end of the year. As per allowance method, estimated uncollectibles or bad debts are charged to allowance for doubtful debts.

Here, $36,000 has been estimated by the manager as estimated uncollectible

Journal entry to record uncollectibles:

Particulars                              Debit                Credit

Bad debt expense                   $36,000

       Allowance for doubtful debts                    $36,000

(To record uncollectibles)