Question

Warner Company’s year-end unadjusted trial balance shows accounts receivable of $89,000, allowance for doubtful accounts of $500 (credit), and sales of $270,000. Uncollectibles are estimated to be 1.5% of accounts receivable.

1. Prepare the December 31 year-end adjusting entry for uncollectibles.
Date General Journal Debit Credit
Dec. 31
2. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of $200?
Amount used in the year-end adjusting entry $
Percent of sales methods L.O. P2
3.) Wecker Company’s year-end unadjusted trial balance shows accounts receivable of $89,000, allowance for doubtful accounts of $500 (credit), and sales of $270,000. Uncollectibles are estimated to be 1.0% of sales.
Prepare the December 31 year-end adjusting entry for uncollectibles.
Date General Journal Debit Credit
Dec. 31

Answer 1

1.-

bad debt expense 835 debit

allowance 835 credit

2.-

bad debt expense 3,335 debit

allowance 3,335 credit

Step-by-step explanation:

A/R 89,000

uncollectibles estimation : 1.5% of A/R

89,000 x 1.5% = 1,335 credit year-end balance

current balance 500 credit

year-end adjusmtent: 1,335 - 500 = 835 credit

2.- if current balance 2,000 debit:

year-end adjusmtent 1,335 - (-2,000) = 1,335 + 2,000 = 3,335

What we are doing is a T account of the allowance account on which we know the ending balance so we must solve for the adjustment:

allowance

DEBIT CREDIT

BEGINNING 2,000

ADJUSTMENT X

ENDING 1,335