Question

7, and drag to the Favorites Bar folder. Or import from another browser. Import favorites Kimmel, Accounting, 6e Help 1 System Announcements CALCULATOR PRINTER VERSION BACK Brief Exercise 215 The ledger of the Ramirez Company at the end of the current year shows Accounts Receivable of $200,000. If Allowance for Doubtful Accounts has a credit balance of $3,000 in the trial balance and bad debts are expected to be 8% of accounts receivable, journalize the adjusting entry for end of the period. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Bad Debt Expense Allowance for Doubtful Accounts If Allowance for Doubtful Accounts has a debit balance of $3,000 in the trial balance and bad debts are expected to be of accounts receivable, journalte the adjusting entry for and of the period. (Credit account tities are automatically indented when the mountientered. Do not inden many 10:24 PM search

Answer 1

Accounts receivable for the current year = $200000

Hence bad debts provision to be created shall be = $200000*8%= $16000.

A) If the allowance for bad debts has a credit balance of $3000, the provision to be created now = $16000-$3000(already created)= $12000.

Hence the entry shall be

Date	Account	Debit	Credit
	Bad debts expense	12000
	To Allowance for doubtful accounts		12000
Being provision for bad debts for the year recorded.

B)If the allowance for bad debts has a debit balance of $ 3000, then the the provision to be created for the current year = $16000+$3000(to compensate for the deficit).

Date	Account	Debit	Credit
	Bad debts expense	19000
	To Allowance for doubtful accounts		19000
Being provision for bad debts for the year recorded.