Question

Assume the following information for Larkspur Corp.

Accounts receivable (beginning balance)		$160,000
Allowance for doubtful accounts (beginning balance)		11,400
Net credit sales		934,000
Collections		920,000
Write-offs of accounts receivable		6,500
Collections of accounts previously written off		2,300

Uncollectible accounts are expected to be 7% of the ending balance in accounts receivable.

Determine the ending balance in Accounts Receivable and the unadjusted balance in Allowance for Doubtful Accounts.

Ending balance in Accounts Receivable		$enter a dollar amount
Unadjusted balance in Allowance for Doubtful Accounts		$enter a dollar amount

Prepare the entry to record bad debt expense for the period. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount
Determine the ending (adjusted) balance in Allowance for Doubtful Accounts. Ending (adjusted) balance in Allowance for Doubtful Accounts $enter the Ending (adjusted) balance in Allowance for Doubtful Accounts in dollars

Answer 1

1) Ending balance in Account receivable = 160000+934000-920000-6500 = 167500

Unadjusted balance of allowance for doubtful accounts = 11400-6500+2300 = 7200

2) Adjusting entry

Account title and explanation	Debit	Credit
Bad debt expense (167500*7%-7200)	4525
Allowance for doubtful accounts		4525

3) Ending adjusted balance in allowance for doubtful accounts = $11725