Respuesta :
Answer:
The adjusting entries are as below:
Dr bad debt expense $4000
Cr Allowance for doubtful accounts $4000
Explanation:
The new allowance for doubtful accounts should be calculated as 10% of the closing balance of accounts receivable,i,e 10% of $400000=$40000
The new $40000 estimates of allowance for doubtful accounts means that the closing balance in allowance for doubtful accounts should be $40000 credit balance.
Since the opening balance was $36000 credit, the extra amount to top it up to $40000 is $4000($40000-$36000)
Hence,the required adjustment to the allowance for doubtful accounts is shown below
Dr bad debt expense $4000
Cr Allowance for doubtful accounts $4000
Answer:
Bad Debts expense is $ 64,000
Explanation:
Computation of Bad Debts expense
Receivable balance at end of year $ 400,000
Estimated uncollectible accounts 10 %
Balance of Uncollectible accounts ( $ 400,000 * 10 %) $ 40,000
Existing balance in allowance for uncollectible accounts
Opening balance $ (36,000)
Less: Receivables written off $ 60,000
Balance of allowance account before adjustment $ 24,000
Required balance is $( 40,000)
Adjustment entry required for bad debts $ 64,000
