Kingston Co. uses the percentage-of-receivables basis to record bad debt expense
ID: 2534864 • Letter: K
Question
Kingston Co. uses the percentage-of-receivables basis to record bad debt expense. It estimates that 2% of accounts receivable will become uncollectible. Accounts receivable are $613,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,520 ? (a) Your answer is correct. Prepare the adjusting journal entry to record bad debt expense for the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Bad Debt Expense 9740 Allowance for Doubtful Accounts 9740 SHOW LIST OF ACCOUNTSSHOW SOLUTION SHOW ANSWER LINK TO TEXT Attempts: 2 of 3 used ? (b) Your answer is incorrect. Try again. If the allowance for doubtful accounts had a debit balance of $800 instead of a credit balance of $2,520, determine the amount to be reported for bad debt expense. Bad Debts Expense 13130Explanation / Answer
Answer to Part a is correct as bad debt expense for the year will be 613000*2%= 12260. Balance of 2520 is already standing in the credit so addtional expense of 9740 wll be recognised.
for part b. there was a debit balance of $800. so we need to cancel the effect by adding 800 and further recognising $12260. hence a total of 12260+800= 13060 will be recognised as bad debt expense
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