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A company's year-end unadjusted trial balance shows accounts receivable of $109,000, allowance for doubtful accounts of...

A company's year-end unadjusted trial balance shows accounts receivable of $109,000, allowance for doubtful accounts of $600 (credit), & sales of $325,000. Uncollectibles are estimated to be 2.5% of accounts receivable.

1. Prepare the December 31 year-end adjusting entry for uncollectible.

2. Assume the same facts as in PART A except that the company estimates uncollectible as 2.0% of sales. Prepare the December 31 year-end adjusting entry for uncollectible.

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Answer #1

1.

Accounts receivable = $109,000

Allowance for doubtful accounts, unadjusted = $600

Sales = $325,000

Percentage uncollectiible = 2.5% of accounts receivable

Bad debt expense = ( Accounts receivable x percentage uncollectible) - Allowance for doubtful accounts, unadjusted

= (109,000 x 2.5%) - 600

= 2,725-600

= $2,125

Date General Journal Debit Credit
Dec. 31 Bad debt expense $2,125
Allowance for doubtful accounts $2,125
( To record bad debt expense)

2.

Percentage uncollectible = 2% of sales

Bad debt expense = 325,000 x 2%

= $6,500

Date General Journal Debit Credit
Dec. 31 Bad debt expense $6,500
Allowance for doubtful accounts $6,500
( To record bad debt expense)
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