15. bestway, inc. had credit sales of $142,000 for the period. the balance in allowance for doubtful…
15. bestway, inc. had credit sales of $142,000 for the period. the balance in allowance for doubtful accounts is a debit of $643. if bestway estimates that 2% of credit sales will be uncollectible, what is the required journal entry to record estimated uncollectible accounts?
Answer
Explanation:
Step1: Calculate estimated uncollectible amount
The estimated uncollectible amount is 2% of credit sales. Credit sales are $142,000. So the estimated uncollectible amount is $142,000\times 0.02=$2,840$.
Step2: Determine the adjustment amount
The Allowance for Doubtful Accounts has a debit balance of $643. To bring the allowance account to the estimated uncollectible amount of $2,840, the adjustment amount is the sum of the debit balance and the estimated uncollectible amount. So the adjustment amount is $2,840 + 643=$3,483$.
Step3: Record the journal - entry
The journal entry to record the estimated uncollectible accounts is to debit Bad Debt Expense and credit Allowance for Doubtful Accounts for $3,483.
Answer:
Debit Bad Debt Expense $3,483; Credit Allowance for Doubtful Accounts $3,483.