Ask Question
13 May, 14:00

Grey Corporation has $100,000 of accounts receivable on December 31. The unadjusted balance of its Allowance for Doubtful Accounts is a credit of $1,000. Experience suggests 5 percent of its receivables will be uncollectible. The amount that should be debited to Bad Debt Expense and credited to Allowance for Doubtful Accounts in the year-end adjusting entry is: a.$1,000 b.$2,070 c.$5,000 d.$6,000 e.$4,000

+5
Answers (1)
  1. 13 May, 14:28
    0
    e. $4,000

    Explanation:

    The calculation of adjusting entry is shown below:-

    Adjusted balance required in Allowance account = Accounts receivable * Receivable percentage

    = $100,000 * 5%

    = $5,000 Credit

    Existing Unadjusted balance in Allowance account = $1,000 credit

    Bad Debt Expense = Adjusted balance required in Allowance account - Existing Unadjusted balance in Allowance account

    = $5,000 - $1,000

    = $4,000

    So, for computing the bad debt expenses we simply deduct existing Unadjusted balance in Allowance account from adjusted balance required in Allowance account
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Grey Corporation has $100,000 of accounts receivable on December 31. The unadjusted balance of its Allowance for Doubtful Accounts is a ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers