Question

At December 31, 2016, the trial balance of Garvey Company contained the following amount before adjustment.

                                                                                                                                           Debits          Credits

         Accounts Receivable                   $ 500,000                  

         Allowance for Doubtful Accounts                         $     4,800                      Sales Revenue                                          2,400,000

Instructions:

(a)  Prepare the adjusting entry at December 31, 2016, for bad debts expense assuming that the aging schedule indicates that $26,000 of accounts receivables will be uncollectible..

(b)  Repeat part (a), assuming that instead of a credit balance there is a $4,800 debit balance in the Allowance for Doubtful Accounts.

(c)  During the next month, January 2017, a $5,000 account receivable is written off as uncollectible. Prepare the journal entry to record the write-off.

Answer 1

a]	Bad debts expense [26000-4800]	$            21,200
	Allowance for doubtful accounts		$           21,200
b]	Bad debts expense [26000+4800]	$            30,800
	Allowance for doubtful accounts		$           30,800
c]	Allowance for doubtful accounts	$              5,000
	Accounts receivable		$ 5,000