Brief Exercise 8-5 Crane Company uses the percentage-of-receivables basis to rec

Question

Brief Exercise 8-5

Crane Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. Accounts receivable are $422,100 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,682.

(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Account Titles and Explanation

Debit

Credit

(a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $934 instead of a credit balance of $2,682, prepare the adjusting journal entry for bad debt expense.

Explanation / Answer

Date Account Title and Explanation Debit $ Credit$ a Bad debt 15002    Allowance for doubt full debt 15002 ( to record allowance for bad debt for full year) b Bad debt 18618    Allowance for doubt full debt 18618 ( to record allowance for bad debt for full year) a Bad debt Account receivable 442100 Bad debt(4%) 17684 Less:   Allowance for doubt full debt -2682 Bad debt for the period 15002 b Bad debt Account receivable 442100 Bad debt(4%) 17684 Add:   Allowance for doubt full debt(debit balance) 934 Bad debt for the period 18618

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