Question

During 2021, its first year of operations, a company provides services on account of $256,000. By the end of 2021, cash collections on these accounts total $133,000. The company estimates that 11% of accounts receivable will be uncollectible. Record the adjustment for uncollectible accounts on December 31, 2021.

Answer 1

The Record for the adjustment for uncollectible accounts on December 31, 2021 would be the following:

31/12/2021 Debit Credit

Bad Debts Expense $ 9,250.00

Allowance for doubtful accounts $ 9,250.00

(To record bad debt expense)

Step-by-step explanation:

In order to Record the adjustment for uncollectible accounts on December 31, 2021 we would have to make the following calculation:

Bad Debts Expense=(services on account-cash collections)*11%

Bad Debts Expense=($256,000-$133,000)*11%

Bad Debts Expense=$13,5330

Therefore, the journal entry would be the following:

31/12/2021 Debit Credit

Bad Debts Expense $ 9,250.00

Allowance for doubtful accounts $ 9,250.00

(To record bad debt expense)