Kingston Co. uses the percentage-of-receivables basis to record bad debt expense

Question

Kingston Co. uses the percentage-of-receivables basis to record bad debt expense. It estimates that 1% of accounts receivable will become uncollectible. Accounts receivable are $420,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $1,500.

(a)

Account Titles and Explanation

Debit

Credit

Kingston Co. uses the percentage-of-receivables basis to record bad debt expense. It estimates that 1% of accounts receivable will become uncollectible. Accounts receivable are $420,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $1,500.

Explanation / Answer

(a)

Account Titles and Explanation Debit Credit Bad Debts Expense[($420,000 x 1%) – $1,500] $2,700 Allow ance for doubtful accounts $2,700

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