me 0609 PM On December 31 Net Sales are 2250000 Accounts Re

me: 06:09 PM / On December 31: Net Sales are $2,250,000. Accounts Receivable is $894,000, and the Allowance for Bad Debts is is 100 debit ir bad debts are estimated at 10% or accounts exact number, no tolerance MacBook Pro

Solution

under allowance method ,we make some provision for bad debt under the name of allowance for bad debt. in this we not directly deduct the amount from account receivable. first we make allowance for bad debt a/c ,and when we are confirmed or actual bad debt happens then we deduct from account receivable a/c.

bad debt = 10% account recievable
=0.10* 894000
=89400

but the allowance we made is of 15100,so for balance we pass the adjusting entry
balance= 89400-15100
=74300

bad debt expense a/c dr 74300
to allowance for bad debt 74300

then when it confirmed that debt is no longer recoverable then we pass following journal entry

allowance for bad debt
To account receivable