Question

The trial balance before adjustment of Wildhorse Inc. shows the following balances.

		Dr.		Cr.
Accounts Receivable		$92,100
Allowance for Doubtful Accounts		1,910
Sales Revenue (all on credit)				$645,700

Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 5% of gross accounts receivable and (b) 6% of gross accounts receivable and Allowance for Doubtful Accounts has a $1,689 credit balance.

Answer 1

a

Entry:

Account title	Debit	Credit
Bad debt expense	6,515
Allowance for uncollectible account		6515
[Entry for recording bad debt expense for the year]

	Opening balance (gross)	92,100
a	Closing balance- Accounts receivable	92,100
b	Percentage allowance	5%
c=a*b	Allowance for uncollectible account calculated closing balance	4,605

	Allowance for uncollectible account:
a	calculated closing balance	4,605
	Less: unadjusted balance in the books:
b	Opening balance	(1,910)
c=a-b	Bad debt expense	6,515

b

Account title	Debit	Credit
Bad debt expense	3,837
Allowance for uncollectible account		3837
[Entry for recording bad debt expense for the year]

	Accounts receivable:
	Opening balance (gross)	92,100
a	Closing balance- Accounts receivable	92,100
b	Percentage allowance	6%
c=a*b	Allowance for uncollectible account calculated closing balance	5,526
d= a-c	Accounts receivable reported net balance	86,574
	Allowance for uncollectible account:
a	calculated closing balance	5,526
	Less: unadjusted balance in the books:
b	Opening balance	1,689
c=a-b	Bad debt expense	3,837