Question

At the end of the current year, the accounts receivable account has a debit balance of $688,000 and sales for the year total $7,800,000. The allowance account before adjustment has a debit balance of $9,300. Bad debt expense is estimated at 3/4 of 1% of sales. The allowance account before adjustment has a debit balance of $9,300. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $29,800. The allowance account before adjustment has a credit balance of $6,200. Bad debt expense is estimated at 1/4 of 1% of sales. The allowance account before adjustment has a credit balance of $6,200. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $51,500. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above. a. $fill in the blank 1 b. $fill in the blank 2 c. $fill in the blank 3 d. $fill in the blank 4

Answer 1

a) allowance for doubtful accounts = -$9,300

uncollectible accounts = 0.75 x 1% x $7,800,000 = $58,500

adjusting journal entry

Dr Bad debt expense 67,800

Cr Allowance for doubtful accounts 67,800

b) allowance for doubtful accounts = -$9,300

uncollectible accounts = $29,800

adjusting journal entry

Dr Bad debt expense 39,100

Cr Allowance for doubtful accounts 39,100

c) allowance for doubtful accounts = $6,200

uncollectible accounts = 0.25 x 1% x $7,800,000 = $19,500

adjusting journal entry

Dr Bad debt expense 13,300

Cr Allowance for doubtful accounts 13,300

d) allowance for doubtful accounts = $6,200

uncollectible accounts = $51,500

adjusting journal entry

Dr Bad debt expense 45,300

Cr Allowance for doubtful accounts 45,300