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23 February, 13:23

Smart Art is a new establishment. During the first year, there were credit sales of $40,000 and collections of credit sales of $36,000. One account for $650 was written off. The company decided to use the aging method to account for bad debts expense. It has calculated an amount of $200 as its estimate of uncollectible amounts at year-end. Prepare the journal entry required to record Bad debts expense at the end of the year.

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  1. 23 February, 14:09
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    The journal entry is shown below:

    Bad debt expense A/c Dr $850

    To Allowance for doubtful debts $850

    (Being the bad debt expenses recorded)

    The computation of bad debt expense is shown below:

    = Written off-balance + estimated amount at the end of the year

    = $650 + $200

    = $850

    For recording the bad debt expense we debited the expense account and credited the contra asset account
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