Question

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $362,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 4% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if Allowance for Doubtful Accounts has a credit balance of $2,400 before adjustment

Answer 1

Answer:

Bad debt expenses                          $ 12,080

Allowance for doubtful accounts                           $ 12,080

Explanation:

Accounts  4% of AR

That is  $362,000 x 4% = $14,480 expected allowance.

The current balance = 2400 credit

Journal entry:

$\text{Account titles and explanation}$                                Debit                   Credit

Bad debt expenses [(362,000 x 4%) - 2400]        $12,080

$\text{Allowance for doubtful accounts}$                                                         $12,080

(To record bad debt expense)