Question

At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, it has outstanding accounts receivable of $98,500, and it estimates that 5% will be uncollectible.

Prepare the adjusting entry to record bad debts expense for the year ended December 31 under the assumption that the Allowance for Doubtful Accounts has:

1. (a) a $1,675 credit balance before the adjustment.

2. (b) a $493 debit balance before the adjustment.

	Date General Journal Debit Credit Dec. 31

Answer 1

Credit Date a) Dec.31 General Journal Bad debts expense [($98,500 * 5%) - $1,675] | Allowance for doubtful accounts Debit $3,250 $3,250 b) Dec.31 $5,418 Bad debts expense [($98,500 * 5%) + $493] Allowance for doubtful accounts $5,418