Question

A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year: (3 points)

Debit Credit
Cash sales……………………………………………….. $188,000
Credit sales……………………………………………… 275,000
Accounts receivable…………………………………….. $76,000
Allowance for doubtful accounts……………………….. 1,000
Prepare the adjusting entry to estimate bad debts assuming an aging analysis estimates that 8% of the outstanding accounts receivable will be uncollectible.

Answer 1

Particulars Amount

Provision for uncollectible $6,080 ($76000*8%)

Less: Provision already made $1,000

Provision to be made $5,080

Date Particulars Debit Credit

31-Dec Bad Debts $5,080

To Allowance for Doubtful Accounts $5,080

(Being the adjusting entry to estimate bad debts)