Question

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $360,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $1,200 before adjustment

Answer 1

Answer:

Account titles and explanation       Debit                 Credit

bad debt expense                           $16,800  

allowance for d doubtful account                                $16,800

Explanation:

Aging of accounts =5% of accounts receivable

Which is 360,000 x 5% = 18,000 expected allowance

current balance before adjustment  =1,200 credit

Adjustment = 18,000 - 1,200 = 16,800

Adjusting entry BY Tanning Company

Account titles and explanation       Debit                 Credit

bad debt expense                           $16,800  

allowance for d doubtful account                                $16,800