Question

Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $134,500, allowance for doubtful accounts of $965 (credit) and sales of $1,075,000. If uncollectible accounts are estimated to be 4% of accounts receivable, what is the amount of the bad debts expense adjusting entry

Answer 1

See below

Step-by-step explanation:

Please see the computation below;

Amount uncollectible

= $134,500 × 4%

= $5,380

Then,

Bad debt

= $5,380 - $965

= $4,415

Therefore, the adjusting entry would be;

Bad debt account Dr $4,415

............................To Allowance for doubtful debt Cr $4,415

(Being bad debt expense that is recorded)

We debited bad debt expense here because it increases the expenses, while allowance for doubtful dent is credited because it decreases the assets.