Question

At December 31, Amy Jo's Appliances had account balances in Accounts Receivable of $308,000 and in Allowance for Uncollectible Accounts of $510 (credit) before any adjustments. An analysis of Amy Jo's December 31 accounts receivable suggests that the allowance for uncollectible accounts should be 3% of accounts receivable. Bad debt expense for the year should be: Multiple Choice $9,750. $8,730. $7,831. $9,240.

Answer 1

$8,730

Step-by-step explanation:

accounts receivable balance = $308,000

allowance for doubtful accounts = $510

the balance for the allowance for doubtful account should be $308,000 x 3% = $9,240

that means that it must increase by $9,240 - $510 = $8,730

the adjusting journal entry should be:

Dr Bad debt expense 8,730

Cr Allowance for doubtful accounts 8,730