Question

At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate...

At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2017, it has outstanding accounts receivable of $137,000, and it estimates that 3% will be uncollectible.

Prepare the adjusting entry to record bad debts expense for year 2017 under the assumption that the Allowance for Doubtful Accounts has:

1.   (a) a $2,329 credit balance before the adjustment.

2.   (b) a $685 debit balance before the adjustment.

Business   Accounting   
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Answer #1
Hi,
Please find the detailed answer as follows:
Part A:
Date' General journal Debit Credit
Bad Debt Expense (137000*3% - 2329) $ 1,781.00
        Allowance for Doubtful Accounts $ 1,781.00
(To Record the Adjusting entry for bad debts )
Date' General journal Debit Credit
Bad Debt Expense (137000*3% + 685) $ 4,795.00
        Allowance for Doubtful Accounts $ 4,795.00
(To Record the Adjusting entry for bad debts )
Note :
The allowance for doubtful debts which has credit balance will be reduced TO record the extra bad debt expense.
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