Question

Grey Corporation has $100,000 of accounts receivable on December 31. The unadjusted balance of its Allowance for Doubtful Accounts is a credit of $1,000. Experience suggests 5 percent of its receivables will be uncollectible. The amount that should be debited to Bad Debt Expense and credited to Allowance for Doubtful Accounts in the year-end adjusting entry is:

Answer 1

Answer: $4000

Step-by-step explanation:

Amount receivable = $100,000

Allowance for uncolletible account at 5%= 5% x 100,000 =$5000

Adjusted balance for Allowance for doubtful accounts = credit of $1000

Bad Debit Expense = Allowance for uncolletible account - Adjusted credit balance on doubtful accounts=$5000-$1000= $4000

JOURNAL ENTRY

Date Accounts Debit Credit

31 Dec Bad Debts $4000

Allowance for doubtful account $4000