Question

Kingbird, Inc. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $290000 and credit sales are $2910000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Kingbird, Inc. make if the Allowance for Doubtful Accounts has a credit balance of $2900 before adjustment?

Answer 1

Dr Bad Debts Expense 8,700

Cr Allowance for Doubtful Accounts 8,700

Step-by-step explanation:

Preparation of the adjusting Journal entry that Kingbird, Inc. will make if the Allowance for Doubtful Accounts has a credit balance of $2900 before adjustment

Based on the information given the Allowance for Doubtful Accounts will have an ending credit balance of 4% of the amount of $290,000 or the amount of $11,600 (4%*$290,000) which means that for us to increase the credit balance of the amount of $2,900 to the amount of $11,600, the account will requires a credit of the amount of $8,700($11,600-$2,900).

Therefore the adjusting Journal entry that Kingbird, Inc. will make if the Allowance for Doubtful Accounts has a credit balance of

the amount of $2,900 before adjustment will be:

Dr Bad Debts Expense 8,700

Cr Allowance for Doubtful Accounts 8,700

[4%*$290,000 -($2,900)]