Question

Cosmo Company reported credit sales of $345,000 during its first year of operations. At December 31, customers owed $35,000 to the company. Based on the experience of similar businesses, management estimates that $3,500 of its accounts receivable will be uncollectible.

Required:
Write down the necessary adjusting entry.

Answer 1

Dr Bad debt expense $3,500

Cr Allowance for doubtful accounts $3,500

Step-by-step explanation:

Based on the information given we were told that management had estimated that the amount of $3,500 of its accounts receivable will be the amount that will be uncollectible which means that the adjusting entry will be to:

Dr Bad debt expense $3,500

Cr Allowance for doubtful accounts $3,500