Answer:
A) total estimated bad debts = $150,000 x 4% = $6,000
total bad debts - allowance for uncollectible accounts = $6,000 - $2,650 = $3,350
so the journal entry should be:
Dr Bad debts expense 3,350
Cr Allowance for uncollectible accounts 3,350
B) if allowance for uncollectible accounts had a debit balance of $1,350, you would need to add that debit balance to the estimated bad debts:
total bad debts + debit balance allowance for uncollectible accounts = $6,000 + $1,350 = $7,350
the journal entry should be:
Dr Bad debts expense 7,350
Cr Allowance for uncollectible accounts 7,350
