Question

At the end of the current year, the accounts receivable account has a debit balance of $777,000 and sales for the year total $8,810,000. The allowance account before adjustment has a debit balance of $10,500. Bad debt expense is estimated at 3/4 of 1% of sales. The allowance account before adjustment has a debit balance of $10,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $33,600. The allowance account before adjustment has a credit balance of $9,300. Bad debt expense is estimated at 1/4 of 1% of sales. The allowance account before adjustment has a credit balance of $9,300. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $77,200.

Determine the amount of the adjusting entry to provide for doubtful accounts under each of the assumptions (a through d) listed above.

Answer 1

Solution:

Journal Entries
Event	Particulars	Debit	Credit
a	Bad debts expense Dr ($8,810,000*1%*3/4)	$66,075.00
	To Allowance for doubtful accounts		$66,075.00
	(To record bad debts expenses)
b	Bad debts expense Dr ($33,600 + $10,500)	$44,100.00
	To Allowance for doubtful accounts		$44,100.00
	(To record bad debts expenses)
c	Bad debts expense Dr ($8,810,000*1%*1/4)	$22,025.00
	To Allowance for doubtful accounts		$22,025.00
	(To record bad debts expenses)
c	Bad debts expense Dr ($77,200 - $9,300)	$67,900.00
	To Allowance for doubtful accounts		$67,900.00
	(To record bad debts expenses)