Exercise 6 – 7: The following items were extracted from the 2012 financial recor
ID: 2447584 • Letter: E
Question
Exercise 6 – 7:
The following items were extracted from the 2012 financial records of Cummins Inc. (dollars in millions):
Allowance for doubtful accounts 12 (cr.)
During the following year, the company wrote off $5 of accounts receivable as uncollectible and then estimated $6 of the year’s receivables to be uncollectible. The company did not recover any previously written-off accounts.
1. Prepare the entry to record the bad debt expense.
2. Compute the final balance in allowance for doubtful accounts.
Explanation / Answer
1)Bad debt expense Debit 6
Allowance for doubtful accounts credit 6
[being bad debt estimated recorded]
2)Balance at end = Balance at beginning + estimation - write off
= 12 + 6 - 5
= $ 13 Cr