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3 September, 21:56

Carla Company reports the following financial information before adjustments.

Accounts Receivable $150,000

Allowance for Doubtful Accounts $2,650

Sales Revenue (all on credit) 821,100

Sales Returns and Allowances 50,660

Prepare the journal entry to record bad debt expense assuming Carla Company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but Allowance for Doubtful Accounts had a $1,350 debit balance.

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  1. 4 September, 00:52
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    A) total estimated bad debts = $150,000 x 4% = $6,000

    total bad debts - allowance for uncollectible accounts = $6,000 - $2,650 = $3,350

    so the journal entry should be:

    Dr Bad debts expense 3,350

    Cr Allowance for uncollectible accounts 3,350

    B) if allowance for uncollectible accounts had a debit balance of $1,350, you would need to add that debit balance to the estimated bad debts:

    total bad debts + debit balance allowance for uncollectible accounts = $6,000 + $1,350 = $7,350

    the journal entry should be:

    Dr Bad debts expense 7,350

    Cr Allowance for uncollectible accounts 7,350
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