Question

The trial balance before adjustment of Taylor Swift Inc. shows the following balances.

DrCr
Accounts Receivable90,000
Allowance for Doubtful Accounts1,750
Sales Revenue (all on credit)$680,000

Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of a 4% of gross accounts receivable and (b) 5% of gross accounts receivable and Allowance for Doubtful Accounts has a $1,700 credit balance.

Answer 1

Step-by-step explanation:

The journal entries are shown below;

a. Bad debt expense A/c Dr $5,350

To Allowance for doubtful debts $5,350

(Being bad debt expense is recorded)

The computation of the bad debt expense is shown below:

= Account receivable × estimated percentage given + debit balance of Allowance for Doubtful Accounts

= $90,000 × 4% + $1,750

= $5,350

B. Bad debt expense A/c Dr $2,800

To Allowance for doubtful debts $2,800

(Being bad debt expense is recorded)

The computation of the bad debt expense is shown below:

= Account receivable × estimated percentage given - credit balance of Allowance for Doubtful Accounts

= $90,000 × 5% - $1,7000

= $2,800