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 3% of accounts receivable will become uncollectible. Accounts receivable are $603,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,030 Prepare the adjusting journal entry to record bad debt expense for the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit If the allowance for doubtful accounts had a debit balance of $910 instead of a credit balance of $2,030, determine the amount to be reported for bad debt expense Bad Debt Expense s

Explanation / Answer

Journal entry would be

Bad debts A/C Dr 16,060

To Allowance for doubtful account A/C 16,060

Explanation

3% of the total account reciveble is $18090 as we alrady have a provision for $2,030 therefore we would need to have a additional provision of $16,060.

Bad debt expenses

($603,000X3%)+910=$19,000

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