Question

Juan, Inc. had the following balances in accounts for the year ending December 31st: Accounts receivable: $3,480,000 (Dr.) Allowance for Doubtful Accounts: $22,000 (Cr.) Net credit sales: $5,500,000 (Cr.) Juan, Inc. estimates bad debt expense as 2% of Accounts Receivable for the year. After recording adjusting journal entries, what is the December 31st balance in Allowance for Doubtful Accounts, after the AJE?

Answer 1

The December 31st balance in Allowance for Doubtful Accounts, after the AJE is $69,600

Step-by-step explanation:

Allowance for doubtful debts is a provision created by the entity for those Accounts Receivables for which settlement may never be received.

Juan, Inc. estimates bad debt expense as 2% of Accounts Receivable for the year

Therefore Provision for allowance for doubtful debts is $3,480,000 × 2% = $69600