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Financial Accounting: Bad Debt expense?


On December 31st, of the current year, a company's unadjusted trial balance revealed the following: Accounts Receivable $185,000; Sales Revenue of $1,280,000; (75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance).

1) Prepare the adjusting journal entry to record the estimate for bad debts assuming:
a) 6% of the accounts receivable balance is assumed to be uncollectible
b) bad debts expense is estimated to be 1.5% of credit sales

538 day(s) ago

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Answers (1)

EchoMan 		A. $185,000 X .06 = $11,100

Amount of additional accrual needed = $11,100 - $1,600 = $9,500

Entry is:

Debit Bad Debt Expense $95600
Credit Allowance for Bad Debt $9,500


B.

Credit Sales = $1,280,000 X .75 = $960,000

Allowance needed = $960,000 X .015 = $14,400

Amount of additional accrual needed = $14,400 - $1,600 = $12,800

Entry is:

Debit Bad Debt Expense $12,800
Credit Allowance for Bad Debt $12,800

Posted 538 days ago

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