answers the question. 31) At December 31, 2016, a companys records incl $750,000

Question

answers the question. 31) At December 31, 2016, a companys records incl $750,000 225,00 Net Sales (all on credit) Accounts Receivable at December 31 Write-offs of Accounts Receivable during the year 7.100 Credit balance in Allowance for Doubtful Accounts at January . 2016 8,500 Required: Part a. The company estimates bad debts as 1.3% of credit sales. Prepare the required adjusting entry to record Bad Debt Expense for the year. ume instead that the company uses the aging of receivables method. Part b. Ass Its aging analysis reveals that the estimate of uncollectible receivables is $11,250. Prepare the required adjusting entry to record Bad Debt Expense for the year. Part c. Assume instead that the company estimates that its Bad Debt Expense for the year is $8,250. Use a T-account to determine the adjusted balance in the Allowance for Doubtful Accounts

Explanation / Answer

Note: The write-offs of accounts receivable are debited to the allowance account and credited to the accounts receivables thus leaving an unadjusted credit balance of $1400 ($8500 - $7100) in the allowance for doubtful accounts. Since the estimated uncollectibles is $11250, a credit of $9850 is required to make the balance in the allowance for doubtful accounts $11250.

Part c.

Part a. Account Titles and Explanation Debit Credit Bad debts expense 9750 Allowance for doubtful accounts 9750 (1.3% x $750000) (To record bad debts expense) Part b. Account Titles and Explanation Debit Credit Bad debts expense 9850 Allowance for doubtful accounts 9850 [$11250 - ($8500 - $7100)] (To record bad debts expense)

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