Question

Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $110,500, and it estimates that 6% will be uncollectible.

Required:
1. Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has:
(a) a $1,879 credit balance before the adjustment.
(b) a $553 debit balance before the adjustment.

Answer 1

The adjusting entries are shown below:

Step-by-step explanation:

The adjusting entries are as follows

1. a. Bad Debt Expense $4,751

To Allowance for Doubtful Accounts $4,751

(Being the bad debt expense is recorded)

It is computed below:

= $110,500 × 6% - $1,879

= $4,751

b. Bad Debt Expense $7,183

To Allowance for Doubtful Accounts $7,183

(Being the bad debt expense is recorded)

It is computed below:

= $110,500 × 6% + $553

= $7,183