Question

A company has $91,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 5% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is a(n) $810 debit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Answer 1

$5,360

Step-by-step explanation:

The adjusting entry is shown below:

Bad debt expense $5,360

To Allowance for doubtful debts $5,360

(Being the bad debt expense is recorded)

For recording this we debited the bad debt expense as it increased the expenses and credited the allowance for doubtful accounts as it reduced the assets

The computation is shown below:

= $91,000 × 5% + $810

= $5,360