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18 August, 03:17

On June 30 (the end of the period), Brown Company has a credit balance of $2,185 in Allowance for Doubtful Accounts. An evaluation of accounts receivable indicates that the proper balance should be $28,305. Journalize the appropriate adjusting entry. If an amount box does not require an entry, leave it blank.

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  1. 18 August, 03:19
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    Answer: The appropriate entry is journalized as follows:

    Debit ($) Credit ($)

    Bad debt expense 26,120

    Allowance for doubtful accounts 26,120

    (Being entries to record additional bad expense provision)

    Explanation: Bad debt expense is an estimate of the amount of accounts receivable that is deemed uncollectible meanwhile allowance for doubtful accounts is a balance sheet allowance account for bad debt and is usually deducted from the accounts receivable to show the actual amount of accounts receivable that is recoverable.

    The $26,120 above was arrived at as the difference between $28,305 and $2,185.
  2. 18 August, 03:41
    0
    Dr Bad debt expense 26,120

    Cr Allowance for uncollectible accounts 26,120

    Explanation:

    The allowance for uncollectible accounts represents the estimated amount of credit sales that the company doesn't expect to collect, i. e. bad debt. This account is a contra asset account that reduces the amount of accounts receivable, that is why it has a credit balance. It is not reported in the balance sheet, since only net accounts receivable is reported.

    Bad debt expense is an expense account that must have a debit balance as any other expense account.

    allowance for uncollectible accounts = $2,185 + $26,120 = $28,305
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