Question

Coronado, Inc. had net sales in 2017 of $1,493,700. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable $329,800 debit, and Allowance for Doubtful Accounts $4,060 credit. If Coronado estimates that 9% of its receivables will prove to be uncollectible. Prepare the December 31, 2017, journal entry to record bad debt expense.

Answer 1

December 31,

DR Bad Debt Expense $25,622‬

CR Allowance for Doubtful Accounts $25,622‬

Step-by-step explanation:

The Allowance for Doubtful Accounts helps provide a sort of cushion for the business by accounting for potential bad debts for the business so that if bad debts occur, they are taken from this account and not the Receivables account.

Coronado estimates that 9% of receivables will be uncollectible so;

= 9% * 329,800

= $29,682‬

However, $4,060 is already in the account so the new balance that should be brought into the account to ensure that it totals $29,682‬ is;

= 29,682‬ - 4,060

= $25,622‬