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31 July, 14:01

During 2018, its first year of operations, Pave Construction provides services on account of $152,000. By the end of 2018, cash collections on these accounts total $106,000. Pave estimates that 30% of the uncollected accounts will be bad debts. Required: 1. Record the adjustment for uncollectible accounts on December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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  1. 31 July, 16:09
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    The adjustment for noncollectable accounts on December 31, 2018:

    Debit Bad Debts Expense $13,800

    Credit Allowance for Doubtful Account $13,800

    Explanation:

    In Pave Construction, 2018 is the first year of operations. The company provides services on account of $152,000.

    By the end of 2018, cash collections on these accounts total $106,000.

    At the end of 2018, Accounts Receivable (the uncollected accounts) has debit balance of $46,000 ($152,000 - $106,000 = $46,000)

    Pave estimates that 30% of the uncollected accounts will be bad debts

    Bad Debts Expense = 30% x $46,000 = $13,800

    The adjusting entry to record the bad debts expense will be:

    Debit Bad Debts Expense $13,800

    Credit Allowance for Doubtful Account $13,800
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