14. a company has $235,000 in credit sales. the company uses the allowance method to account for…

14. a company has $235,000 in credit sales. the company uses the allowance method to account for uncollectible accounts. the allowance for doubtful accounts now has a $7,250 credit balance. if the company estimates 7% of credit sales will be uncollectible, what is the journal entry to record estimated uncollectible accounts?

14. a company has $235,000 in credit sales. the company uses the allowance method to account for uncollectible accounts. the allowance for doubtful accounts now has a $7,250 credit balance. if the company estimates 7% of credit sales will be uncollectible, what is the journal entry to record estimated uncollectible accounts?

Answer

Explanation:

Step1: Calculate estimated uncollectible amount

The estimated uncollectible amount is 7% of credit sales. Credit sales are $235,000. So the estimated uncollectible amount is $235,000\times0.07=$16,450$.

Step2: Determine bad - debt expense

The Allowance for Doubtful Accounts has a $7,250 credit balance. The bad - debt expense is the amount needed to adjust the allowance account to the estimated uncollectible amount. So bad - debt expense is $16,450 - 7,250=$9,200$.

Step3: Record journal entry

The journal entry to record estimated uncollectible accounts is a debit to Bad - Debt Expense for $9,200 and a credit to Allowance for Doubtful Accounts for $9,200.

Answer:

Debit Bad - Debt Expense $9,200; Credit Allowance for Doubtful Accounts $9,200