Question

At the end of the current year, the accounts receivable account of Malik's Lanscaping Service has a debit balance of $390,000. Credit sales are $2,730,000. Record the end-of-period adjusting entry on December 31, in general journal form, for the estimated uncollectible accounts. Assume the following independent conditions existed prior to the adjustment:

Allowance for Doubtful Accounts has a credit balance of $1,770.
The percentage of sales method is used and bad debt expense is estimated to be 1% of credit sales. If an amount box does not require an entry, leave it blank.

Date Account title Doc No. Post REF Debit Credit
1. 20-Dec.31 _____________
2. _____________
3. _____________

Answer 1

Answer:

Date             Account Title                                Post REF    Debit           Credit

20 Dec. 31    Bad Debt Expense                                         $27,300

                     Allowance for Doubtful Debt                                             $27,300

Explanation:

The bad debt expense for the year is estimated at 1% of credit sales using the percentage of sales method:

= 1% * 2,730,000

= $27,300

This figure will be debited to the expense account for Bad debts and credited to the Allowance for Doubtful debt account.