Warner Company's year-end unadjusted trial balance shows accounts receivable of $118,000, allowance for doubtful accounts of $790 (credit), and sales of $470,000. Uncollectibles are estimated to be 1.50% of accounts receivable. 1. Prepare the December 31 year-end adjusting entry for uncollectibles.

The needed adjusting entry is:

Dr Bad debt expense $980

Cr Allowance for uncollectible accounts $980

Explanation:

The new provision for uncollectible accounts is $1,770 (1.5%*$118,000), which implies that the balance required in the allowance for uncollectible accounts at the end of the year is $1,770 credit balance.

From all indications, the opening balance in the allowance for uncollectible accounts is $790 and only requires a credit entry of $980 to bring it up to $1,770, the expected closing balance.

As a result of the above, the required adjusting entry for uncollectibles is as follows:

Dr Bad debt expense $980

Cr Allowance for uncollectible accounts $980