Question

Metlock, Inc. uses the percentage-of-receivables basis to record bad debt expense and concludes that 3% of accounts receivable will become uncollectible. Accounts receivable are $361,400 at the end of the year, and the allowance for doubtful accounts has a credit balance of $3,039. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $979 instead of a credit balance of $3,039, prepare the adjusting journal entry for bad debt expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit

Answer 1

	Calculation of Estimated Credit Balance in Allowance for Doubtful Debts required at the end of year:-
a	Acounts Receivable	=	$361,400
b.	% accounts receivable estimated to be uncollectible	=	3.00%
c.	Estimated Credit Balance in Allowance for Doubtful Debts required (a*b)	=	$10,842
(a)	Calculation of Bad Debts Expense at the end of year:-
a	Estimated Credit Balance in Allowance for Doubtful Debts required		$                    10,842
b.	Current Balance in Allowance for Doubtful Debts (Credit)		$                      3,039
c.	Bad debts Expense for the year (a-b)		$                      7,803
Date	General Journal		Debit	Credit
(a)	Bad debts Expense		$                7,803
	Allowance for Uncollectible Accounts			$7,803
	(To record the bad debts expense)
(b)	Calculation of Bad Debts Expense at the end of year:-
a	Estimated Credit Balance in Allowance for Doubtful Debts required		$                    10,842
b.	Current Balance in Allowance for Doubtful Debts (debit)		$                         979
c.	Bad debts Expense for the year (a+b)		$                    11,821
Date	General Journal		Debit	Credit
(b)	Bad debts Expense		$              11,821
	Allowance for Uncollectible Accounts			$11,821
	(To record the bad debts expense)

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