Question

P -Entries for bad debt expense. The trial balance before adjustment of Risen Company reports the following balances $300,000 Accounts receivable Allowance for doubtful accounts Sales (all on credit) Sales returns and allowances 5,000 1,700,000 80,000 Instructions (a) Prepare the entry for estimated bad debts assuming that doubtful accounts are estimated to be 6% of gross accounts receivable. (b) Assume that all the information above is the same, except that the Allowance for Doubtful Accounts has a debit balance of $5,000 instead of a credit balance. How will this difference affect the journal entry in part (a)?

Answer 1

1a) Adjusting entry

Date	account and explanation	Debit	Credit
	Bad debt expense (300000*6%-5000)	13000
	Allowance for doubtful accounts		13000
	(To record bad debt expense)

1b) Adjusting entry

Date	account and explanation	Debit	Credit
	Bad debt expense (300000*6%+5000)	23000
	Allowance for doubtful accounts		23000
	(To record bad debt expense)

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