Brief Exercise 8-7 Kingston Co. uses the percentage-of-receivables basis to reco

Question

Brief Exercise 8-7

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 $428,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,100.

Account Titles and Explanation

Debit

Credit

Brief Exercise 8-7

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 $428,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,100.

Explanation / Answer

Journal entry: Bad debts expense Account Dr. 2180      Allowance for doubtful accounts 2180 Note: Required balance in Alllowance (428000*1%) 4280 Less: Actual balance in Allowance 2100 Bad debts expense for t he year 2180 Journal entry: Bad debts expense Account Dr. 5130      Allowance for doubtful accounts 5130 Note: Required balance in Alllowance (428000*1%) 4280 Add: Debit balance in Allowance 850 Bad debts expense for t he year 5130 Bad debts expense in the case is $5130

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