Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $148,000, and it estimates that 5% will be uncollectible.
Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has:
(a) a $2,516 credit balance before the adjustment.
(b) a $740 debit balance before the adjustment.
| Debit | Credit | |||
| a | Bad Debts expense | 4884 | =(148000*5%)-2516 | |
| Allowance for Doubtful Accounts | 4884 | |||
| b | Bad Debts expense | 8140 | =(148000*5%)+740 | |
| Allowance for Doubtful Accounts | 8140 |
Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has