Oriole Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 2% of accounts receivable will become uncollectible. Accounts receivable are $391,900 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,903. (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 $827 instead of a credit balance of $2,903, prepare the adjusting journal entry for bad debt expense.

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Candice

Business

12 January, 21:18

Oriole Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 2% of accounts receivable will become uncollectible. Accounts receivable are $391,900 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,903. (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 $827 instead of a credit balance of $2,903, prepare the adjusting journal entry for bad debt expense.

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Lawson Webster · Answer 1

Answer and Explanation:

According to the scenario, journal entry for the given data are as follows:

a). Journal entry to record bad-debt expense

Bad-debt expense A/c [ ($391,900 * 2:100) - $2,903] Dr. $4,935

To Allowance for doubtful accounts A/c $4,935

(To record bad-debts expense)

b). Journal entry to record bad-debt expense

Bad-debt expense A/c [ ($391900*2:100) + $827 ] Dr. $8,665

To Allowance for doubtful accounts A/c $8,665

(To record bad-debts expense)