Question

At the end of the first year of operations, Gaur Manufacturing had gross accounts receivable of $348,000. Gaur's management estimates that 7% of the accounts will prove uncollectible. What journal entry should Gaur record to establish an allowance for uncollectible accounts?

Answer 1

Answer:

Explanation:

The journal entry is shown below:

Bad debt expense A/c Dr  $24,360

  To Allowance for doubtful debts  $24,360

(Being bad debt expense is recorded)

The computation of the bad debt expense is shown below:

= Gross accounts receivable × estimated percentage given

= $348,000 × 7%

= $24,360

We debited the bad debt expense and credited the allowance for doubtful debts account so that the correct posting can be done