Question

Flint Company reports the following financial information before adjustments. Cr. Dr. $140,800 Accounts Receivable Allowance for Doubtful Accounts Sales Revenue (all on credit) Sales Returns and Allowances $2,480 816,800 53,910 Prepare the journal entry to record bad debt expense assuming Flint Company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but Allowance for Doubtful Accounts had a $1,540 debit balance. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit (a) (b) e Textbook and Media List of Accounts

Answer 1

a)

	Dr. $	Cr. $
Bad debt expense Acc Dr.	3152
Allowance for doubtful debts		3152

Bad debt expense is calculated as follows:

140800 x 4% = $5632

But already there is a credit balance in the allowance account $2480. So only 3152 (5632-2480) is to be adjusted.

Allowance for doubtful debts
Date	Details	$	Date	Details	$
				Balance b/d	2480
	Balance c/d	5632		Bad debt expense	3152
		5632			5632

b)

	Dr. $	Cr. $
Bad debt expense Acc Dr.	7172
Allowance for doubtful debts		7172

Bad debt expense is calculated as follows:

140800 x 4% = $5632

But already there is a debit balance in the allowance account $1540. So $7172 (5632+1540) is to be adjusted. As it is a debit balance, this account is already overdrawn.

Allowance for doubtful debts
Date	Details	$	Date	Details	$
	Balance b/d	1540
	Balance c/d	5632		Bad debt expense	7172
		7172			7172