Question

Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $128,500, allowance for doubtful accounts of $905 (credit) and sales of $1,045,000. If uncollectible accounts are estimated to be 6% of accounts receivable, what is the amount of the bad debts expense adjusting entry

Answer 1

Answer and Explanation:

The computation is shown below:

Amount Uncollectible is

= $128,500 × 6%

= $7,710

Now the bad debt is

= $7,710 - $905

= $7,105

The adjsuting entry would be

Bad Debt A/c Dr $7,105

       To Allowance for Doubtful Debts $7,105

(being bad debt expense is recorded)

here bad debt expense is debited as it increased the expenses and credited the allowance as it decreased the assets. Also the expenses and assets contains normal debit balance