Question

Cr E7-9 (L03) (Computing Bad Debts and Preparing Journal Entries) The trial balance before adjustment of Taylor Swift Inc. shows the following balances. Dr. Accounts Receivable $90,000 Allowance for Doubtful Accounts 1,750 Sales Revenue (all on credit) $680,000 Instructions Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 4% of gross accounts receivable and (b) 5% of gross accounts receivable and Allowance for Doubtful Accounts has a $1,700 credit balance.

Answer 1

Answer

• Requirement [a]

Accounts title	Debit	Credit
Bad Debt Expense [or Uncollectible account expense]	$5,350
Allowance for Doubtful account		$5,350

--Working

Number of Days	Receivables
Past Due	Amount	% uncollectible	Uncollectible amount
Not Due	$90,000	4%	$3,600
Adjusted balance required of Allowance for Doubtful Account (A)			$3,600
Unadjusted balance in the Allowance account (B) - Credit (Debit)			($1,750)
Bad Debt expense : (A - B)			$5,350

• Requirement [b]

Accounts title	Debit	Credit
Bad Debt Expense [or Uncollectible account expense]	$2,800
Allowance for Doubtful account		$2,800

--Working

Number of Days	Receivables
Past Due	Amount	% uncollectible	Uncollectible amount
Not Due	$90,000	5%	$4,500
Adjusted balance required of Allowance for Doubtful Account (A)			$4,500
Unadjusted balance in the Allowance account (B) - Credit (Debit)			$1,700
Bad Debt expense : (A - B)			$2,800