Question

Providing for Doubtful Accounts At the end of the current year, the accounts receivable account has a debit balance of $821,000 and sales for the year total $9,310,000. The allowance account before adjustment has a debit balance of $11,100. Bad debt expense is estimated at 1/4 of 1% of sales. The allowance account before adjustment has a debit balance of $11,100. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $35,500. The allowance account before adjustment has a credit balance of $5,900. Bad debt expense is estimated at 1/2 of 1% of sales. The allowance account before adjustment has a credit balance of $5,900. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $49,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above. a. $ b. $ c. $ d.$

Answer 1

a.

Sales = $9,310,000

Estimated bad debts = 1/4 of 1% of sales

= 9,310,000 x 1% x 1/4

= $23,275

Amount of adjusted entry to provide for doubtful accounts = $23,275

b.

Allowance for doubtful accounts, existing = $11,100 (Debit)

Allowance for doubtful accounts, ending = $35,500

Bad debt expense = Allowance for doubtful accounts, ending + Allowance for doubtful accounts, existing

= 35,500+11,100

= $46,600

Amount of adjusted entry to provide for doubtful accounts = $46,600

c.

Sales = $9,310,000

Estimated bad debt expense = 1/2 of 1% of sales

= 9,310,000 x 1% x 1/2

= $46,550

Amount of adjusted entry to provide for doubtful accounts = $46,550

d.

Allowance for doubtful accounts, existing = $5,900

Allowance for doubtful accounts, ending = $49,000

Bad debt expense = Allowance for doubtful accounts, ending - Allowance for doubtful accounts, existing

= 49,000-5,900

= $43,100

Amount of adjusted entry to provide for doubtful accounts = $43,100

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