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Marigold Corp. uses the percentage-of-receivables basis to record bad debt expense and concludes that 3% of accounts receivable will become uncollectible. Accounts receivable are $416,900 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,545. (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 $950 instead of a credit balance of $2,545, prepare the adjusting journal entry for bad debt expense.

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  1. Yesterday, 21:15
    0
    The solution of question will be as follows;

    Explanation:

    a. $416,900*3%=$12,507

    Allowance for the year shall be = $12,507-$2,545=$9,962

    Bad Debt Expense Dr.$9,962

    Allowance for Doubtful Accounts Cr.$9,962

    b.$416,900*3%=$12,507+$950=$13,457

    Bad Debt Expense Dr.$13,457

    allowance for Doubtful Accounts Cr.$13,457
  2. Yesterday, 22:43
    0
    Accounts receivable are $416,900 at the end of the year,

    Allowance for doubtful accounts has a credit balance of $2,545.

    Bad Debts = 3% of accounts receivable = 3% * 416,900 = 12507

    The adjusting entry would be

    Bad Debts Expense $ 12507 Dr.

    Allowance for doubtful accounts $ 12507 Credit

    As we already have a credit balance of $ 2545 in the doubtful accounts we will increase it with an amount of $ 9962.

    a) Required adjustment of $ 9962 in the Allowance for Uncollectibles

    b) If we have debit balance then

    Unadjusted Balance of Uncollectibles $ 950 Dr.

    Estimated Balances $ 12507

    Required Adjustment $ 13547

    The data tells that the Allowance for Doubtful Accounts has a debit balance of $950 the required adjustment to the allowance for doubtful accounts is $13547. The required entry is

    Bad debts Expense 13547 Dr.

    Allowance for Uncollectibles 13547 Cr.
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