Question

Prepare the December 31, 2014, journal entry to record bad debt expense for Wilton, Inc. given the following information: Net sales in 2014 were $1,482,300. Before adjusting entries, the balances in selected accounts were: Accounts Receivable $279,900 debit, and Allowance for Doubtful Accounts $4,130 credit. If Wilton estimates that 4% of its net sales will prove to be uncollectible, what is the journal entry to record bad debt expense?

Answer 1

Record bad debt expense for Wilton, Inc., a bad debt expense of $59,292 is calculated as 4% of net sales and recorded with a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.

Step-by-step explanation:

To record bad debt expense for Wilton, Inc. on December 31, 2014, we need to calculate the amount of expense that is estimated to be uncollectible. Wilton estimates that 4% of its net sales will be uncollectible. The net sales for 2014 are $1,482,300. Therefore, the bad debt expense will be 4% of $1,482,300, which amounts to $59,292.

Before the adjusting entry, Wilton, Inc. has an existing credit balance in the Allowance for Doubtful Accounts of $4,130. When we record the bad debt expense, we need to adjust the Allowance for Doubtful Accounts so that it reflects the total estimated uncollectibles.

The journal entry to record the bad debt expense is:

• 
  
• Debit Bad Debt Expense $59,292
• 
  
• Credit Allowance for Doubtful Accounts $59,292

This entry increases the Bad Debt Expense on the income statement and increases the Allowance for Doubtful Accounts on the balance sheet, offsetting the Accounts Receivable balance.