Question

Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $138,000, and it estimates that 6% will be uncollectible. Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has: (a) a $2,346 credit balance before the adjustment. (b) a $690 debit balance before the adjustment.

Answer 1

Answer and Explanation:

The journal entries are shown below:

a. Bad Debt Expense Dr. $5,934

To Allowance for Doubtful Accounts Cr. $5,934

(Being the bad debt expense is recorded)

The computation is shown below:

= $138,000 × 6% - $2,346

= $5,934

b. Bad Debt Expense Dr. $8,970

To Allowance for Doubtful Accounts Cr. $8,970

(Being the bad debt expense is recorded)

The computation is shown below:

= $138,000 × 6% + $690

= $8,970