Question

Cosmo Company reported credit sales of $345,000 for the calendar year in its first year of operations. At December 31, customers buying on credit owed $35,000 to the company. Based on the experience of similar businesses, management estimates that $3,500 of its accounts receivable will be uncollectible.
Required:
Prepare the necessary journal entry by selecting the account names and entering the dollar amounts in the debit or credit columns.

Answer 1

Answer:

Dec. 31

Dr Bad Debts Expense $3,500

Cr Allowance for Doubtful Accounts $3,500

Explanation:

Cosmo Company

Journal entry

Dec. 31

Dr Bad Debts Expense $3,500

Cr Allowance for Doubtful Accounts $3,500

Therefore in a case where a particular accounts is been identified as uncollectible, those accounts are written off against the Allowance for Doubtful Accounts.