Question

A trial balance before adjustments included the following:　Debit 　　　　　Credit

Sales 　　　　　　　　　　　　　 　 $850,000

Sales returns and allowance 　　　　　 $28,000

Accounts receivable　　　　　　　　 　86,000

Allowance for doubtful accounts 　　　　　 1,520

(A) If the estimate of uncollectibles is made by taking 10% of Gross Account Receivables, the amount of the adjustment (bad debt expense) is ?

(B) The amount of the adjustment (bad debt expense) is? If the Allowance for doubtful accounts has balance of debit $1,820 ?

(C) Please use the result of (A) to make the journal entry for recording estimated uncollectibles.

(D) An authorized write-off of the $1,000 balance owed by customer ABC. The entry to record the write-off are:

Answer 1

(A)

Bad debt expenses = (Accounts receivable X % of uncollectible) - Credit balance of allowance for doubtful accounts

= ($86,000 X 10%) - $1,520

= $7,080

(B)

Bad debt expenses = (Accounts receivable X % of uncollectible) + Debit balance of allowance for doubtful accounts

= ($86,000 X 10%) + $1,820

= $10,420

(C)

Accounts	Debit	Credit
Bad debt expenses	$7,080	-
Allowance for doubtful accounts	-	$7,080

(D)

Accounts	Debit	Credit
Allowance for doubtful accounts	$1,000	-
Accounts receivable	-	$1,000