At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2017, it has outstanding accounts receivable of $140,500, and it estimates that 4% will be uncollectible. Prepare the adjusting entry to record bad debts expense for year 2017 under the assumption that the Allowance for Doubtful Accounts has: (a) a $2,389 credit balance before the adjustment. (b) a $703 debit balance before the adjustment.

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Business

Mariyah Lowe

23 April, 17:14

At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2017, it has outstanding accounts receivable of $140,500, and it estimates that 4% will be uncollectible. Prepare the adjusting entry to record bad debts expense for year 2017 under the assumption that the Allowance for Doubtful Accounts has: (a) a $2,389 credit balance before the adjustment. (b) a $703 debit balance before the adjustment.

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Jax Beard · Answer 1

The journal entries are shown below:

a. Bad debt expense Dr $3,231

To Allowance for doubtful debts $3,231

(Being the bad debt is recorded)

It is computed below:

= $140,500 * 4% - $2,389

= $3,231

b. Bad debt expense Dr $3,231

To Allowance for doubtful debts $3,231

(Being the bad debt is recorded)

It is computed below:

= $140,500 * 4% + $703

= $6,323