Question

Monty Corp. has been in business for several years. At the end of the current year, the ledger shows: Accounts Receivable $ 326,200 Dr. Sales Revenue 2,761,700 Cr. Allowance for Doubtful Accounts 6,100 Cr. Uncollectible accounts are estimated to be 6% of accounts receivable. Prepare the entry to adjust Allowance for Doubtful Accounts. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer and Explanation:

The journal entry is shown below:

Bad debt expense Dr $13,472

To allowance for doubtful debts $13,472

(Being the bad debt expense is recorded)

The bad debt expense is

= 6% of $326,200 - $6,100

= $13,472

Here the bad debt expense is debited as it increased the assets and credited the allowance for doubtful debts