Question

Windsor, Inc. uses the percentage-of-receivables basis to record bad debt expense and concludes that 3% of accounts receivable will become uncollectible. Accounts receivable are $427,700 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,540.

(a)		Prepare the adjusting journal entry to record bad debt expense for the year.
		(b) If the allowance for doubtful accounts had a debit balance of $979 instead of a credit balance of $2,540, prepare the adjusting journal entry for bad debt expense.

Answer 1

No.	Account Titles and Explanation		Debit ($)	Credit ($)
a	Bad debt expense (427,700*3%) - 2,540		10,291
		Allowance for doubtful accounts		10,291
	(Bad debt expense recorded)
b	Bad debt expense (427,700*3%) +979		13,810
		Allowance for doubtful accounts		13,810
	(Bad debt expense recorded)