Brief Exercise 8-5 waterway Industries uses the percentage-of-receivables basis

Question

Brief Exercise 8-5 waterway Industries uses the percentage-of-receivables basis to record bad debt expense and concludes that 3% of accounts receivable will become uncollectible. Accounts receivable are $396,800 at the end of the year, and the allowance for doubtful accounts has a credit balance of $3,043. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $951 instead of a credit balance of $3,043, prepare the adjusting journal entry for bad debt expense (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS

Explanation / Answer

No. Account titles and explanation Debit Credit (a) Bad Debts Expense[($396,800 x 3%) – $3,043] $8,861 Allowance for doubtful accounts $8,861 (b) Bad Debts Expense[($396,800 x 3%) + $951] $12,855 Allowance for doubtful accounts $12,855

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