Question

Analysis of Receivables Method At the end of the current year, Accounts Receivable has a balance of $535,000; Allowance for Doubtful Accounts has a debit balance of $5,000; and sales for the year total $2,410,000. Using the aging method, the balance of Allowance for Doubtful Accounts is estimated as $17,500.

Answer 1

Answer

--Adjusted balance in Allowance account required as per Aging Analysis = $ 17500 Credit

--Existing Unadjusted balance in Allowance account = $ 5000 Debit

--BAD DEBT EXPENSE = $ 17500 Credit required + $ 5000 Debit to be removed = 17500 + 5000 = $ 22,500

--Adjusting entry:
[Debit] Bad Debt Expense for $ 22,500
[Credit] Allowance for DOubtful Accounts for $ 22,500