Question

Cosmo Company reported credit sales of $345,000 for the calendar year in its first year of operations. At December 31, customers buying on credit owed $35,000 to the company. Based on the experience of similar businesses, management estimates that $3,500 of its accounts receivable will be uncollectible.

Required:
Prepare the necessary December 31 adjusting entry by selecting the correct account names and dollar amounts

Answer 1

Answer and Explanation:

The journal entry is given below:

Bad debt expense $3,500

To Allowance for doubtful debts $3,500

(Being bad debt expense is recorded)

Here bad debt expense is debited as it increased the expense and credited the allowance as it decreased the assets