Question

Swifty Corporation uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. Accounts receivable are $417,800 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,657. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $932 instead of a credit balance of $2,657, prepare the adjusting journal entry for bad debt expense.

Answer 1

Answer: Please see explanation column for answer.

Explanation:

for  Swifty  Coporation .

 

To calculate the allowance for doubtful account with credit balance of $2657

Account Particulars                                                        Amount

Allowance from doubtful account    4% x $ 417, 800 $16, 712

credit balance ( less)                                                     $2,657

bad debt expense                                                          $14,055

A)Journal to record bad debt expense

Account                            Debit           Credit

bad debts expense       $14055

Allowance of doubtful accounts        $14055

b) if the allowance for doubtful accounts had a debit balance of $932 instead of a credit balance of $2,657

Account Particulars                                                        Amount

Allowance from doubtful account    4% x $ 417, 800 $16, 712

debit  balance ( add)                                                         $932

bad debt expense                                                           $17644

B)Journal to record bad debt expense

Account                            Debit           Credit

bad debts expense       $17,644

Allowance of doubtful accounts        $17644