At the end of the year, Mercy Cosmetics' balance of Allowance for Uncollectible Accounts is $400 (credit) before adjustment. The balance of Accounts Receivable is $15,000. The company estimates that 10% of accounts will not be collected over the next year. What adjustment would Mercy Cosmetics record for Allowance for Uncollectible Accounts? (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

Bad debt expense $ 1.100

Allowance for Uncollectible Accounts $ 1.100

Explanation:

Initial Balance

Accounts Receivable $ 15,000

Allowance for Uncollectible Accounts $ 400

It's necessary to entry the next journal entry to meet the amount indicate by the method.

Bad debt expense $ 1,100

Allowance for Uncollectible Accounts $ 1,100

Final Balance

Accounts Receivable $ 15.000

Allowance for Uncollectible Accounts $ 1.500

Accounts Uncollectible are those credit that the company give and there are not chances of been collected. When the customers buy products on credits but then the company can't collect the debt, then it's necessary to write off the unpaid bill as uncollectible

One way it's to write-off directly the bad debts at the moment decided that the credit are uncollectible, the total amount it's reported as bad debt expenses which affect negativly the income statement and the accounts receivable are reduce in the same amount, less assets.

The other way it's to determine a percentage of total amount of accounts receivables as uncollectible, exist many ways to analize the accounts receivable and figure the value of uncollectible. When the company have the percentage of uncollectible accounts the journal entry required is Bad Expenses (debit) with Allowance for Uncollectible Accounts (credit). At the moment of the write-off as the expenses were before recognized we only use the Allowance for Uncollectible Accounts (Debit) with Accounts Receivable (Credit), with this we are recognizing the uncollectible credit of the company.