Question

Coronado Industries uses the percentage-of-receivables basis to record bad debt expense and concludes that 3% of accounts receivable will become uncollectible. Accounts receivable are $385,200 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,870. (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 $887 instead of a credit balance of $2,870, 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 (a) Bad Debt Expense 11556 Allowance for Doubtful Accounts 2870 (b) Allowance for Doubtful Accounts 887 Accounts Receivable

Answer 1

No Credit Account Titles and Explanation Bad Debt expenses Allowence for Doubtful accounts Debit 8,686 | $ $ 8,686 $ 12,443 Bad Debt expenses Allowence for Doubtful accounts $ 12.443 Working Notes: Bad Debt expenses = $385,200*3%-$2,870 = $11,556-$2,870 = $8,686 (a) Bad Debt expense = $11,556+$887 = $12,443