On January 1, 2018, the general ledger of Big Blast Fireworks includes the follo
ID: 2413055 • Letter: O
Question
On January 1, 2018, the general ledger of Big Blast Fireworks includes the following information: A/R $44,000 Allowance for uncollectible accounts $3,300 At the end of January, $5,500 of A/R are past due, and the company estimates that 30% of these accounts will not be collected. Of the remaining A/R, the company estimates that 5% will not be collected. During the month of January $675,000 in sales on account. $661,000 in payments and $2,400 was written off for A/R. Prepare adjusting journal entry.
Explanation / Answer
Ending balance of account receivable = 44000+675000-661000-2400 = 55600
Ending balance of allowance for doubtful account before adjustment = 3300-2400 = 900
Estimated allowance for doubtful accounts balance = (5500*30%+50100*5%) = 4155
Adjusting entry :
Date accounts & explanation debit credit Bad debt expense (4155-900) 3255 Allowance for doubtful accounts 3255 (To record adjusting entry)