Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $137,500, and it estimates that 3% will be uncollectible.

Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has:

(a) a $2,338 credit balance before the adjustment.

(b) a $688 debit balance before the adjustment.

Question

Madisen

Business

23 March, 11:13

Mazie Supply Co. uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $137,500, and it estimates that 3% will be uncollectible.

Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has:

(a) a $2,338 credit balance before the adjustment.

(b) a $688 debit balance before the adjustment.

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Answers (1)

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Buchanan · Answer 1

a)

Dr Bad debts expense 1,787

Cr Allowance for doubtful accounts 1,787

b)

Dr Bad debts expense 4,813

Cr Allowance for doubtful accounts 4,813

Explanation:

Mazie Supply Co. Journal entry

a)

Dr Bad debts expense 1,787

($4813-$2,338+$688)

($4,813-$3,036)

Cr Allowance for doubtful accounts 1,787

b)

Dr Bad debts expense 4,813

(3%*$137,500+$688)

($4125+$688)

Cr Allowance for doubtful accounts 4,813