Question

Blazer Company has outstanding Accounts Receivables of $1,000,000 on December 31 based on Credit Sales of $3,000,000 for the year. Rich Carvajal, Chief Accountant at Blazer, estimates that 5% of their receivables will be uncollectible. He also determines that the Allowance for Doubtful Accounts has a $7,000 credit balance on December 31 prior to any adjustments. On March 1, Blazer determines that a $5,000 account owed by GTech Corp will be uncollectible.

If Blazer uses the Allowance Method to account for bad debts based on percent of receivables, Blazer's Dec 31 adjusting entry will include which of the following?

Answer 1

Allowance for doubtful accounts, existing = $7,000

Accounts receivable = $1,000,000

Estimated uncollectible = 5% of accounts receivable

bad debt expense = (Accounts receivable x Estimated uncollectible) - Allowance for doubtful accounts, existing

= (1,000,000 x 5%) - 7,000

= $43,000

On dec 31, te following adjusting entry will be made :

Journal

Date	Account Title and Explanation	Debit	Credit
Dec 31	Bad debt expense	43,000
	Allowance for doubtful accounts		43,000
	(To record bad debt expense)