Question

At the end of the year, Mercy Cosmetics' balance of Allowance for Uncollectible Accounts is $600 (debit, before adjustment. The balance of Accounts Receivable is $25,000. The company estimates that 12% of accounts will not be collected over the next year. 

What is the adjustment Mercy Cosmetics would record for Allowance for Uncollectible Accounts? (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) 

Answer 1

1)

Estimated Allowance for Uncollectible Accounts ($25,000 × 12%)	$3000
Less: Allowance for Uncollectible Accounts Balance (credit)	( $600)
Adjustment Mercy would record	$ 2400

2) Journal Entry:

Date	Account Name	Debit	Credit
1	Bad debt expense	$2400
	To Allowance for uncollectible accounts		$2400

Answer 2

Solution

Transaction	General Journal	Debit	Credit
1	Bad debts expense	$          3,600.00
	Allowance for doubtful accounts		$         3,600.00
	(To record bad debts expense)

Working

Estimated balance of allowance for uncollectables (25000 x 12%)	$        3,000.00	Cr
Add: Balance in Allowance for uncollectable account (Dr)	$            600.00	Dr
Total bad debts to be recorded	$        3,600.00	Cr