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16 August, 04:51

Waterway Company reports the following financial information before adjustments. Dr. Cr. Accounts Receivable $145,600 Allowance for Doubtful Accounts $3,350 Sales Revenue (all on credit) 834,000 Sales Returns and Allowances 53,540 Prepare the journal entry to record bad debt expense assuming Waterway Company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but Allowance for Doubtful Accounts had a $1,420 debit balance

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  1. 16 August, 05:15
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    The journal entry is shown below:

    Explanation:

    According to the scenario, the journal entry are as follows:

    (a). Journal entry

    Bad Debt expenses A/c Dr $2,474

    To Allowance for Doubtful debts A/c $2,474

    (Being the bad debt expense is recorded)

    Computation = ($145,600 * 4%) - $3,350 = $5,824 - $3,350

    = $2,474

    (b). Journal entry

    Bad Debt expenses A/c Dr $7,244

    To Allowance for Doubtful debts A/c $7,244

    (Being the bad debt expense is recorded)

    Computation = ($145,600 * 4%) + $1,420 = $5,824 + 1,420

    = $7,244
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