At the end of the current year, the accounts receivable account has a debit bala

Question

At the end of the current year, the accounts receivable account has a debit balance of $925,000 and sales for the year total $10,490,000.

a. The allowance account before adjustment has a credit balance of $12,500. Bad debt expense is estimated at 3/4 of 1% of sales.

c.The allowance account before adjustment has a debit balance of $5,300. Bad debt expense is estimated at 1/4 of 1% of sales.

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

Explanation / Answer

Assuming bad debt provision is being done in % of sales method, so no consideration for Allowance account existing balance made Details Amt $ 1 Sales for the year      10,490,000.00 a Bad debt expense estimated 3/4th of 1% of sales =              78,675.00 Adjusting Entry Account title Dr $ Cr $ Allowance for Doubtful Accounts              78,675.00 Bad Debt Expenses              78,675.00 b Bad debt expense estimated 1/4th of 1% of sales =              26,225.00 Adjusting Entry Account title Dr $ Cr $ Allowance for Doubtful Accounts              26,225.00 Bad Debt Expenses              26,225.00

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