Answer:
Accounts Receivable $80,000,
Bad debt losses of 1% of credit sales= 1% * $ 80,000= $ 800
Allowance for Doubtful Accounts $5,000 credit
Bad Debts $ 800 Debit
Allowance for Doubtful Accounts $4,200 credit
Two entries will be required
For recording Bad debts Expense
Bad Debts Expense $ 800 Dr
Allowance for Doubtful Accounts $ 800 credit
Adjusting Entry at year end.
Allowance for Doubtful Accounts $ 800 Debit
Account Receivables $ 800 Credit
Answer:
The adjusting entry is the following
Bad debts expense dr $10,000
Allowance for doubtful account $ 10,000
Explanation:
According to the question, the reportes sales are of $ 1,000,000 and management anticipates that bad debt losses of 1% of credit sales.
So the The bad debt expense= 1%× Net credit Sales
Which means that= 1% × $ 1,000,000
= $ 10,000
The $ 10,000 is the allowance for doubtfull account.
This means that the journal entry would be
Bad debts expense dr $10,000
Allowance for doubtful account $ 10,000
