Question

Exercise 7-9 The trial balance before adjustment of Teal Inc. shows the following balances. Dr. Cr. Accounts Receivable $95,900 Allowance for Doubtful Accounts 3,260 Sales Revenue (all on credit) $656,600 Give the entry for estimated bad debts assuming that the allowance is to provide for doubtful accounts on the basis of (a) 5% of gross accounts receivable and (b) 6% of gross accounts receivable and Allowance for Doubtful Accounts has a $1,532 credit balance. (If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) No. Account Titles and Explanation Credit Debit (a) (b)

Answer 1

(a) Bad Debt Expense = (Accounts receivable ending balance x percentage estimated as uncollectible) + existing debit balance in allowance for doubtful accounts

= 95,900 x 5/100 + 3,260

= 4,795 + 3,260

= $8,055

(b) Bad Debt Expense = (Accounts receivable ending balance x percentage estimated as uncollectible) – Existing credit balance in allowance for doubtful accounts

= 95,900 x 6/100 - 1,532

= 5,754 - 1,532

= $4,222

Journal

Date	Account title	Debit	Credit
a	Bad debt expense	8,055
	Allowance for Doubtful Accounts		8,055
b	Bad debt expense	4,222
	Allowance for Doubtful Accounts		4,222

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