Question

Warner Company's year-end unadjusted trial balance shows accounts receivable of $116,000, allowance for doubtful accounts of $770 (credit), and sales of $450,000. Uncollectibles are estimated to be 1.50% of accounts receivable. 

1. Prepare the December 31 year-end adjusting entry for uncollectibles. 

   
   

2. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of $1,150?

   Amount used in the year-end adjusting entry = _______ 

Answer 1

1)

Bad debts expense	970
Allowance for Doubtful Accounts		970
(116,000*1.50%)-770

2)

Amount used in year end adjusting entry

= (116,000*1.50%) + 1150

= 2890

Answer 2

Warner Company’s year-end unadjusted trial balance shows accounts receivable of $116,000, allowance for doubtful accounts of $770 (credit), and sales of $450,000. Uncollectibles are estimated to be 1% of sales.
 
Prepare the December 31 year-end adjusting entry for uncollectibles.