Question

E7-7.  

(Recording Bad Debts)

(LO 3) Duncan Company reports the following financial information before adjustments.

	Dr.	Cr.
Accounts Receivable	$100,000
Allowance for Doubtful Accounts		$  2,000
Sales Revenue (all on credit)		900,000
Sales Returns and Allowances	50,000

Instructions

Prepare the journal entry to record Bad Debt Expense assuming Duncan Company estimates bad debts at (a) 5% of accounts receivable and (b) 5% of accounts receivable but Allowance for Doubtful Accounts had a $1,500 debit balance.

Answer 1

a)

Date	Particulars	Debit	Credit
Dec. 31	Bad debt expense ((100,000 * 5%) - 2,000)	3,000
	Allowance for doubtful accounts		3,000

b)

Date	Particulars	Debit	Credit
Dec. 31	Bad debt expense ((100,000 * 5%) +1,500)	6,500
	Allowance for doubtful accounts		6,500

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