Linhart co uses the percentage of accounts receivable basis to record bad debts

Question

Linhart co uses the percentage of accounts receivable basis to record bad debts expense. It estimates that 1% of accounts receivable will become uncolletible. Accounts receivable are $450,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $1,500.

My journal entry is.....

Bad debt exp 470,900
Allowance for doubtful accounts 470,900

Here is my question... If the allowance for doubtful accounts had a debit balance of $800 instead of a credit balance of $1,500, determine the amount to be reported for bad debts expense.

Explanation / Answer

(a) $450,000 ×0.01 = $4,500 doubtful accounts has a credit balance of $1,500. Bad Debts Expense $4,500 -1500 Bad debt exp $3,000 b) if the Allowance for Doubtful accounts had an $800 debit balance, adjusting entry 4500+800= 5300$ PLEASE RATE

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