Question

Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $146,500, allowance for doubtful accounts of $1,085 (credit) and sales of $1,135,000. If uncollectible accounts are estimated to be 5% of accounts receivable, what is the amount of the bad debts expense adjusting entry?

Answer 1

Answer:

bad debt expense 6,240 debit

allowance for uncollectible accounts 6,240 credit

Explanation:

uncolelctible accounts balance 5% of AR

ending balance 5% of 146,500 = 7,325

allowance balance credit (1.085)

Adjustment 6,240

Notice it state the estimated balance of the uncolelctibles, so the result is the desired ending balance.