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29 December, 20:49

Oriole Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 2% of accounts receivable will become uncollectible. Accounts receivable are $391,900 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,903. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $827 instead of a credit balance of $2,903, prepare the adjusting journal entry for bad debt expense.

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  1. 29 December, 22:41
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    Answer and Explanation:

    According to the scenario, journal entry for the given data are as follows:

    a). Journal entry to record bad-debt expense

    Bad-debt expense A/c [ ($391,900 * 2:100) - $2,903] Dr. $4,935

    To Allowance for doubtful accounts A/c $4,935

    (To record bad-debts expense)

    b). Journal entry to record bad-debt expense

    Bad-debt expense A/c [ ($391900*2:100) + $827 ] Dr. $8,665

    To Allowance for doubtful accounts A/c $8,665

    (To record bad-debts expense)
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