Question

GPB Company uses an allowance method to account for bad debts. Company estimates that 5% of the outstanding accounts receivable will be uncollectible. At the end of the year, accounts receivable has a balance of $750,000, and Allowance for Uncollectible Accounts has a debit balance of $9,000. Company should record uncollectible accounts expense as:

Answer 1

Company should record uncollectible accounts expense as: $46,500

Step-by-step explanation:

At the end of the year:

Estimated Uncollectible = 5% x $750,000 = $37,500

Before adjusting, Allowance for Uncollectible Accounts has a debit balance of $9,000 and GPB Company uses an allowance method to account for bad debts. Therefore, Company should record:

Uncollectible accounts expense = Estimated Uncollectible + $9,000 = $37,500 + $9,000 = $46,500

The entry:

Debit Uncollectible accounts expense $46,500

Credit Allowance for Uncollectible Accounts $46,500