Question

Larkspur Distributors, Inc. had net sales in 2017 of $2,300,000. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable $320,000 debit, and Allowance for Doubtful Accounts $1,500 debit. If Larkspur estimates that 6% of its receivables will prove to be uncollectible, prepare the December 31, 2017, journal entry to record bad debt expense. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Answer 1

Debit Bad debts expense $20,700

Credit Allowance for Doubtful Accounts $20,700

Step-by-step explanation:

At December 31, 2017:

Accounts Receivable had a debit balance of $320,000

Larkspur estimates that 6% of its receivables will prove to be uncollectible.

Estimated uncollectible : 6% x $320,000 = $19,200

Before adjusting, Allowance for Doubtful Accounts had a debit balance of $1,500. So Bad debts expense will be: $1,500 + $19,200 = $20,700

The adjustment entry to record Bad debts expense:

Debit Bad debts expense $20,700

Credit Allowance for Doubtful Accounts $20,700