Crane Company uses the percentage-of-receivables basis to record bad debt expens

Question

Crane Company uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. Accounts receivable are $422,100 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,682. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $934 instead of a credit balance of $2,682, prepare the adjusting journal entry for bad debt expense. (Credit account titles are automatically indented when amount is entered. Do not indent manually. No. Account Titles and Explanation Debit Credit

Explanation / Answer

Rreq a: Accounts receivable -Gross 422100 Estimated unrealisable (422100*4%) 16884 Less: Balance in Allowance 2682 Bad debts expense 14202 Adjusting entry: Bad debts expense Account Dr. 14202     Allowance for Doubtful account 14202 Req b: Accounts receivable -Gross 422100 Estimated unrealisable (422100*4%) 16884 Add: Debit balance in Allowance 934 Bad debts expense 17818 Adjusting entry: Bad debts expense Account Dr. 17818     Allowance for Doubtful account 17818

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