Question

Please do it by type not pics.

1.Pita Pan has an accounts receivable balance of $250,000 and uses the percentage-of-receivables approach to estimate their allowance for doubtful accounts. The allowance account currently has a debit balance of $7,808. If the estimated %-for-allowance is 2% what would the credit to AFDA be in the journal entry to adjust to the appropriate amount?

Answer 1

Solution:-

Credit to AFDA

$ 2,808

Explanation:-

Allowance For Doubtful Accounts have debit balance because the amount ofActual Bad Debts Written Off is greater than the Provision For Doubtful Debts / Allowance for Doubtful Accounts.

For Example, the account receivable for the Previous Accounting Year was Rs.250,000 and there was a provision for doubtful debts was 2% on Accounts Receivable while the Actual Bad Debts Written off in the Current Accounting Period is Rs. 7,808, so now we need to adjust the Balance in Allowance For Doubtful Accounts.

Credit to AFDA = 7,808 - (250,000 * 2%)

= 2,808.