Final answer:
The student asked how to write the journal entry for Bad Debt Expense, which is obtained by calculating 5% of the $185,500 Accounts Receivable and considering the existing $3,100 credit balance in Allowance for Doubtful Accounts. The Bad Debt Expense is $9,275, and it's recorded with a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts.
Step-by-step explanation:
The subject of the question is the journal entry required to record the Bad Debt Expense for Quality Inc. To calculate the bad debt expense, we use the percentage of the estimated uncollectible receivables and the current total accounts receivable amount. In this case, the company estimates that 5% of their $185,500 in Accounts Receivable will not be collectible. Therefore, the bad debt expense for the period is 5% of $185,500, which equals $9,275.
Before recording the bad debt expense, it's important to note that the Allowance for Doubtful Accounts already has a credit balance of $3,100. The new adjustment will need to take this existing balance into account.
To record the bad debt expense, Quality Inc. will make the following journal entry:
This entry records the estimated uncollectible receivables and increases the Allowance for Doubtful Accounts to a total of $12,375 ($3,100 credit balance + $9,275 adjustment).