At the end of the year, Mercy Cosmetics' balance of Allowance for Uncollectible Accounts is $830 (debit) before adjustment. The balance of Accounts Receivable is $27,300. The company estimates that 9% of accounts will not be collected over the next year. What is the adjustment Mercy Cosmetics would record for Allowance for Uncollectible Accounts?

The journal entry showing the adjustment is shown as:

Dr bad debt expense $3287

Cr Allowance for uncollectible accounts $3287

Explanation:

The company estimate of uncollectible account this year is calculated by multiplying the percentage of uncollectible accounts by the balance in the accounts receivable.

Hence, estimate of uncollectible account is 9%*$27,300=$2457

The estimate of $2457 implies that the balance in the allowance for uncollectible accounts should be $2457 credit balance as at the end of the year.

In order to achieve that, reverse the debit balance of $830 in the account by posting a credit of $830, that takes the account to nil, then post a new allowance for uncollectible accounts ($2457 credit entry)

Without mincing words, the adjusting entries passed is the sum of the two credit entries of $3287