Question

In: Accounting

Mazie Supply Co. uses the percent of accounts receivable method.


Exercise 7-7 Percent of accounts receivable method LO P3 


Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $114,500, and it estimates that 4% will be uncollectible. 


Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has:


 (a) a $1,947 credit balance before the adjustment.

 (b) a $573 debit balance before the adjustment. 

Solutions

Expert Solution

Transaction General Journal Debit Credit
(a) Bad Debt Expense          [($114,500 x 4%) - $1,947] $2,633
     Allowance for Doubtful Accounts    $2,633
(To record bad debt expense)
Transaction General Journal Debit Credit
(b) Bad Debt Expense              [($114,500 x 4%) + $573] $5,153
     Allowance for Doubtful Accounts    $5,153
(To record bad debt expense)

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