Question

The Accounts Receivable balance for Gold​, Inc. at December​ 31, 2017​, was $27,000. During 2018​, Gold earned revenue of 461,000 on account and collected $326,000 on account. Gold wrote off $6,400 receivables as uncollectible. Industry experience suggests that uncollectible accounts will amount to 2​% of accounts receivable.

1. Assume Gold had an unadjusted $1,800 credit balance in Allowance for Bad Debts at December ​31, 2018. Journalize Gold​'s December ​31, 2018​, adjustment to record bad debts expense using the​ percent-of-receivables method.

2.  Assume Gold had an unadjusted $1,500 debit balance in Allowance for Bad Debts at December ​31, 2018. Journalize Gold​'s December ​31, 2018​, adjustment to record bad debts expense using the​ percent-of-receivables method.

Answer 1

• General Working

Accounts receivables beginning balance	$27,000
Sales on account	$461,000
Cash Collection	($326,000)
Written off	($6,400)
Accounts receivables ending balance	$155,600

• Requirement 1

Date	Accounts title	Debit	Credit
31-Dec-18	Bad Debt Expense	$1,312
	Allowance for Doubtful accounts		$1,312

>Working

A	Accounts receivables ending balance	$155,600
B = A x 2%	Adjusted balance in Allowance account required	$3,112	Credit
C	Unadjusted balance in Allowance account	$1,800	Credit
D = B - C	Bad Debt Expense	$1,312

• Requirement 2

Date	Accounts title	Debit	Credit
31-Dec-18	Bad Debt Expense	$4,612
	Allowance for Doubtful accounts		$4,612

>Working

A	Accounts receivables ending balance	$155,600
B = A x 2%	Adjusted balance in Allowance account required	$3,112	Credit
C	Unadjusted balance in Allowance account	$1,500	Debit
D = B + C	Bad Debt Expense	$4,612