Question

a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 4.5% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method. b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $12,000 credit. c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $1,000 debit.

Answer 1

Based on the information give the estimated balance of the allowance for doubtful accounts is $25,650.

a. Estimated allowance for doubtful accounts

Estimated allowance for doubtful accounts =$570,000×4.5%

Estimated allowance for doubtful accounts =$25,650

b. Adjusting journal entry

Dec 31

Debit Bad debt expense  $13,650

($25,650-$12,000)  

Credit Allowance for doubtful accounts $13,650

(To record bad debts expense)

 

c. Adjusting journal entry

Dec 31

Debit Bad debt expense $26,650

($25,650+$1,000)  

Credit Allowance for doubtful accounts $26,650

(To record bad debts expense )

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