Bramble Corp. uses the percentage-of-receivables basis to record bad debt expense and concludes that 2% of accounts receivable will become uncollectible. Accounts receivable are $370,200 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,664. (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 $956 instead of a credit balance of $2,664, prepare the adjusting journal entry for bad debt expense.

Question

Milagros Savage

Business

16 August, 18:51

Bramble Corp. uses the percentage-of-receivables basis to record bad debt expense and concludes that 2% of accounts receivable will become uncollectible. Accounts receivable are $370,200 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,664. (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 $956 instead of a credit balance of $2,664, prepare the adjusting journal entry for bad debt expense.

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Kailey · Answer 1

(a)

Bad debt expense debit 4,740

Allowance for doubtful accounts credit 4,740

(b)

Bad debt expense debit 8,360

Allowance for doubtful accounts credit 8,360

Explanation:

AR = 370,200

Allowance 2% of AR = 7,404

Current balance 2,664

Adjusment 4,740

if Current Balance 956 DEBIT

Then 7,404 + 956 = 8,360

We are adding because the allowance is a counter asst account, his normal balance is credit, so we have to credit for 956 to zero-out the balance and then another 7,404 credit to get the correct balance so total oof 8,360