Santana Rey, owner of Business Solutions, realizes that she needs to begin accou

Question

Santana Rey, owner of Business Solutions, realizes that she needs to begin accounting for bad debts expense. Assume that Business Solutions has total revenues of $44,000 during the first three months of 2012, and that the Accounts Receivable balance on March 31, 2012, is $22,867.



1b.
Prepare the adjusting entry needed for Business Solutions to recognize bad debts expense, which are estimated to be 2% of accounts receivable on March 31, 2012 (assume a zero unadjusted balance in the Allowance for Doubtful Accounts at March 31). (Round your answers to the nearest dollar amount. Omit the "$" sign in your response.)
Bad Debts Expense 457.34
Allowance for Doubtful Accounts 457.34


Assume that Business Solutions' Accounts Receivable balance at June 30, 2012, is $20,250 and that one account of $100 has been written off against the Allowance for Doubtful Accounts since March 31, 2012. If S. Rey uses the method prescribed in Part 1b, what adjusting journal entry must be made to recognize bad debts expense on June 30, 2012? (Round your intermediate calculation to the nearest dollar amount. Omit the "$" sign in your response.)

Bad Debts Expense ?
Allowance for Doubtful Accounts?


I can't figure out what the amount is?

It is not $100

Explanation / Answer

Jun 30 Allowance for Doubtful Accounts Dr 100 Acct Rxable Cr 100 To record $100 written off against the Allowance for Doubtful Accounts SO Allow for Bad debt will now have a balance of (457.34-100=357.34). Now A/r on 30 Jun is $20250. SO 2% of 20250 = $405. Balance needd is $405. So addl Prov reqd is $405-357.34 = $47.66 Jun 30 Bad Debts Expense Dr 47.66 Allowance for Doubtful Accounts Cr 47.66 To maintain the ALlow for Bad debt to 2% of A/R

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