Question

2. Gomez Company's year-end u umpany's year-end unadjusted trial balance shows accounts receivable of $100,000, allowance for doubtful accounts of $600 (credit), and sales of $200,000. a) Prepare the December 31 year-end adjustine entry to record Bad Debts Expense, assuming Uncollectibles are estimated to be 0.5% of sales. Dec. 31 b) Prepare the December 31 year-end adjusting entry to record Bad Debts Expense, assuming Uncollectibles are estimated to be 2% of accounts receivable. Dec. 31

Answer 1

a.
Bad debt expense	0.50%*Sales
Bad debt expense	0.50%*200000
Bad debt expense	$1,000
Journal entry to record bad debt expense
General Journal	Debit	Credit
Bad debt expense	$1,000
Allowance for doubtful accounts		$1,000
(To record bad debt expense)
b.
Total uncollectible	$2,000	2%*100000
Less: Allowance balance	$600
Bad debt expense	$1,400
Journal entry to record bad debt expense
General Journal	Debit	Credit
Bad debt expense	$1,400
Allowance for doubtful accounts		$1,400
(To record bad debt expense)
Bad debt is expense account and thus is debited for increase in balance.
Allowance for doubtful account is contra asset account and thus credited for increase in balance.