Answer and Explanation:
Debit bad debt expense for $40,000 and credit allowance for uncollectible accounts for $40,000
Answer:
This is set up by debiting the bad debt expense $40,000 and crediting an allowance for uncollectible receivables $40,000.
Explanation:
When sales are made and cash is yet to be collected, credit sales and debit accounts receivable.
Where an assessment is carried out and part or all of the amounts expected to be received ( as recorded in the accounts receivable) become doubtful, an allowance is created by crediting allowance for doubtful debts and debiting bad debts expense.
Allowance for uncollectible accounts amounts to
= $240,000 - $200,000
= $40,000
