Answer:
Journal entries
(a)
Dr. Bad Debt Expense $4,207
Cr. Allowance for Doubtful Accounts $4,207
(b)
Dr. Bad Debt Expense $5,737
Cr. Allowance for Doubtful Accounts $5,737
Explanation:
Bad debt Expense will be calculated using the percentage of debt loss. The expense will be calculated using the account receivable balance.
Closing Value of the Allowance for Doubtful Accounts will be as follow
Closing Balance = $127,500 x 5% = $6,375
(a)
As Allowance for Doubtful Accounts already have balance of $2,168, we need to adjust the remainder to make the closing balance of Allowance for Doubtful Accounts $6,375 at the year end.
Adjustment Value = $6,375 - $2,168 = $4,207
(b)
As Allowance for Doubtful Accounts already have balance of $638, we need to adjust the remainder to make the closing balance of Allowance for Doubtful Accounts $6,375 at the year end.
Adjustment Value = $6,375 - $638 = $5,737
