Question

During the year, credit sales amounted to $800,000. Cash collected on credit sales amounted to $760,000 and $18,000 has been written off. At the end of the year, company adjusted for bad debts expense using the percent-of-sales method and applied a rate, based on past history, of 2.5%. The ending balance in the Allowance for Bad Debts would be ________. Prepare all necessary journal entries.

Answer 1

the journal entry to record bad debt expense should be:

December 31, 202x, allowance for uncollectible accounts

Dr Bad debt expense 550

Cr Allowance for bad debts 550

The balance of the allowance for bad debts (uncollectible accounts) is $550.

Step-by-step explanation:

Accounts receivable

debit credit

800,000

760,000

18,000

22,000

550

21,450

$22,000 x 2.5% = $550

When accounts were written off, the journal entry was:

Dr Bad debt expense 18,000

Cr Accounts receivable 18,000