BE8-5 Jaya Co. uses the percentage of receivables basisto record bad debts expen
ID: 2502191 • Letter: B
Question
BE8-5 Jaya Co. uses the percentage of receivables basisto record bad debts expense and concludes that2% of accounts receivable will become uncollectible. Accountsreceivable are $500,000 atthe end of the year, and the allowance for doubtful accountshasa credit balanceof $1,500.
(a) Prepare theadjusting journal entry to record bad debts expense for theyear.
(b) If theallowance for doubtful accounts had a debit balance of $600 insteadof a credit balance of $1,500,prepare the adjusting journal entry for bad debts expense.
BE8-5 Jaya Co. uses the percentage of receivables basisto record bad debts expense and concludes that2% of accounts receivable will become uncollectible. Accountsreceivable are $500,000 atthe end of the year, and the allowance for doubtful accountshas
a credit balanceof $1,500.
(a) Prepare theadjusting journal entry to record bad debts expense for theyear.
(b) If theallowance for doubtful accounts had a debit balance of $600 insteadof a credit balance of $1,500,prepare the adjusting journal entry for bad debts expense.
Explanation / Answer
Bad debtsexpense = 2% of accounts receivable = 2% *$500000 = $10000 (a) Allowance for doubtfull accounts $1500 (Cr.)balance Dr. Cr. adjustingentry: Bad debts expense ($10000-$1500) $8500 Allownce for doubtfullaccounts $8500 (b) Allowance for doubtfull accounts $600 (Dr.)balance adjusting entry: Bad debts expense ($10000 + $600) $10600 Allowancefor doubtfullaccounts $10600Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.