Question

At the end of the year, Breyer Associates had a credit balance in its allowance for uncollectible accounts of $12,000 before adjustment. The balance in Breyer's gross accounts receivable is $600,000. Breyer's management estimates that 10% of its accounts receivable balance will not be collected.

 

What journal entry should Breyer record to adjust its allowance for uncollectible accounts? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 

Answer 1

Bad Debt Expense = (Accounts receivable ending balance x percentage estimated as uncollectible) – Existing credit balance in allowance for doubtful accounts
= 600,000 x 10/100 - 12,000
= 60,000 - 12,000
= $48,000

Journal

Transaction	General Journal	Debit	Credit
1	Bad debt expense	48,000
	Allowance for doubtful accounts		48,000
	(To record bad debt expense)