Question

Ivanhoe, Inc. had net sales in 2020 of $1,410,300. At December 31, 2020, before adjusting entries, the balances in selected accounts were Accounts Receivable $348,200 debit, and Allowance for Doubtful Accounts $2,940 credit. If Ivanhoe estimates that 10% of its receivables will prove to be uncollectible.Prepare the December 31, 2020, journal entry to record bad debt expense

Answer 1

The Journal entry is as follows:

On December 31, 2020

Bad debt expense A/c Dr. $31,880

To allowance for doubtful accounts $31,880

(To record bad debt expense)

Workings:

Accounts Receivable = $348,200

Allowance for Doubtful Accounts = $2,940

If Ivanhoe estimates that 10% of its receivables will prove to be uncollectible, then

Bad debt expense:

= (Accounts Receivable × 10%) - Allowance for Doubtful Accounts

= ($348,200 × 10%) - $2,940

= $34,820 - $2,940

= $31,880