Question

On June 30 (the end of the period), Brown Company has a credit balance of $2,185 in Allowance for Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $28,305. Journalize the appropriate adjusting entry. If an amount box does not require an entry, leave it blank.

Answer 1

Answer: The appropriate entry is journalized as follows:

                                                         Debit ($)                                   Credit ($)

Bad debt expense                            26,120

Allowance for doubtful accounts                                                       26,120

(Being entries to record additional bad expense provision)

Explanation: Bad debt expense is an estimate of the amount of accounts receivable that is deemed uncollectible meanwhile allowance for doubtful accounts is a balance sheet allowance account for bad debt and is usually deducted from the accounts receivable to show the actual amount of accounts receivable that is recoverable.

The $26,120 above was arrived at as the difference between $28,305 and $2,185.

Answer 2

Answer:

Dr Bad debt expense 26,120

    Cr Allowance for uncollectible accounts 26,120

Explanation:

The allowance for uncollectible accounts represents the estimated amount of credit sales that the company doesn't expect to collect, i.e. bad debt. This account is a contra asset account that reduces the amount of accounts receivable, that is why it has a credit balance. It is not reported in the balance sheet, since only net accounts receivable is reported.

Bad debt expense is an expense account that must have a debit balance as any other expense account.

allowance for uncollectible accounts = $2,185 + $26,120 = $28,305