Answer:
The balance in Allowance for Doubtful Accounts at December 31, 2014 is $96,916 and the required bad debt expense is $101,116, journalized as follows:
Debit Bad debt expense $101,116
Credit Allowance for doubtful accounts $101,116
<em>(To record bad debt expense for the year)</em>
Explanation:
Let's journalize the transactions that occurred in 2014 as follows:
Debit Accounts receivable $2,422,900
Credit Sale revenue $2,422,900
<em>(To record sales on account)</em>
Debit Accounts receivable $9,200
Credit Allowance for doubtful accounts $9,200
<em>(To re-eastblish sales on account previously written off)</em>
Debit Cash $9,200
Credit Accounts receivable $9,200
<em>(To record collections on account previously written off)</em>
Debit Allowance for doubtful accounts $31,500
Credit Accounts receivable $31,500
<em>(To write-off accounts receivable that is uncollectible)</em>
Since Shore Co. adopts 4% of credit sales. This translates to 4% x $2,422,900 = $96,916. The effects of the journals above on the opening balance of the allowance for doubtful accounts is $18,100 + $9,200 - $31,500 = $4,200 (debit). Bad debt expense is therefore $101,116 ($4,200 + $96,916).
