Concord Company uses the percentage of receivables method for recording bad debt expense. The accounts receivable balance is $607000 and credit sales are $2760000. Management estimates that 3% of accounts receivable will be uncollectible. What adjusting entry will Concord Company make to record bad debt expense if the Allowance for Doubtful Accounts has a $5100 credit balance before adjustment?

Question

Paola Castillo

Business

10 September, 03:47

Concord Company uses the percentage of receivables method for recording bad debt expense. The accounts receivable balance is $607000 and credit sales are $2760000. Management estimates that 3% of accounts receivable will be uncollectible. What adjusting entry will Concord Company make to record bad debt expense if the Allowance for Doubtful Accounts has a $5100 credit balance before adjustment?

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Leia Garrett · Answer 1

accounting adjustment

bad debts 13,110

bad debts forecast. 13,110

Explanation:

The important data here is the amount of the account receivable at the end of the period, since on this the percentage of bad debts is calculated (it could also be the case that the company makes the forecast on its sales).

so. 607,000 x 3% = 18,210

In the initial balance the forecast is 5,100, so it is appropriate to adjust this amount for the difference.

18,210 - 5,100 = 13,110 (negative result)