Question

Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $58,000, and it estimates that 5% 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 $986 credit balance before the adjustment. (b) a $290 debit balance before the adjustment.

Answer 1

(a) a $986 credit balance before the adjustment.

$2,900 - $986 = $1,914

Dr Bad debt expense 1,914

Cr Allowance for doubtful accounts 1,914

(b) a $290 debit balance before the adjustment.

$2,900 + $290 = $3,190

Dr Bad debt expense 3,190

Cr Allowance for doubtful accounts 3,190

Step-by-step explanation:

outstanding accounts receivable $58,000 x 5% = $2,900 in bad debt