On December 31, 2008 Lakers company had the following account balances releated

Question

On December 31, 2008 Lakers company had the following account balances releated to credit sales and receivable prior to recording adjusting entries
Accounts Receivable $ 26,000
Allowance for doubtful accounts $300 (credit)
Sales Revenue (all credit) $500,000
Present the year end adjusting entires related to the uncollectible accounts for
- It is estimated the 1% of the credit sales for the year will not be collected
-The same information is available, but the allowance for doubtful accounts has a $300 DEBIT balance.

Explanation / Answer

If the adjusting entry requires 1% of credit sales relate to uncollectible accounts then : Bad Debts Expense (500,000 x 1%) 5,000 Allowance for Uncollectible Accounts 5,000 Therefore, All for Uncoll Accts should have a cred bal of $300 + 5,000 = 5,300

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