Question

Longbine Company's ledger at the end of the current year shows Accounts Receivable of $150,000.                              
                              
Instructions                              
a. If Allowance for Doubtful Accounts has a credit balance of $3,000 in the trial balance and bad debts are expected to be 6% of accounts receivable, journalize the adjusting entry for the end of the period.                               
b. If Allowance for Doubtful Accounts has a debit balance of $3,000 in the trial balance and bad debts are expected to be 6% of accounts receivable, journalize the adjusting entry for the end of the period                              

Answer 1

· Requirement [a]

Accounts title	Debit	Credit
Bad Debt Expense	$6,000
Allowance for Doubtful accounts [($150000 x 6%) balance required - $ 3000 credit balance]		$6,000
(to record adjustment of bad debt expense)

· Requirement [b]

Accounts title	Debit	Credit
Bad Debt Expense	$12,000
Allowance for Doubtful accounts [($150000 x 6%) balance required + $ 3000 debit balance]		$12,000
(to record adjustment of bad debt expense)