Question

Concord Corporation uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. Accounts receivable are $421,300 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,921. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $870 instead of a credit balance of $2,921, prepare the adjusting journal entry for bad debt expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Step-by-step explanation:

The journal entries are shown below:

a. Bad debt expense A/c Dr $13,931

To Allowance for doubtful debts $13,931

(Being bad debt expense is recorded)

It is computed below:

= $421,300 × 4% - $2,921

= $13,931

b. a. Bad debt expense A/c Dr $17,722

To Allowance for doubtful debts $17,722

(Being bad debt expense is recorded)

It is computed below:

= $421,300 × 4% + $870

= $17,722