Question

At the end of the first year of operations, Mayberry Advertising had accounts receivable of $22,100. Management of the company estimates that 8% of the accounts will not be collected. What adjustment would Mayberry Advertising record to establish Allowance for Uncollectible Accounts? (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

See explanation section

Step-by-step explanation:

The adjustment Mayberry Advertising would record to establish Allowance for Uncollectible Accounts is as follows:

Debit Bad Debt Expense $1,768

Credit Allowance for doubtful accounts $1,768

Calculation: $22,100 × 8% = $1,768

As there was no beginning debit or credit balance of allowance for doubtful accounts, we did not need to adjust the expense. Mayberry Advertising just added the amount in the expense section.