Question

Whispering Winds Corp. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $190000 and credit sales are $1910000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Whispering Winds Corp. make if the Allowance for Doubtful Accounts has a credit balance of $3800 before adjustment?

Answer 1

Answer:

bad debt expense 5,700 debit

  allowance for Doubful Accounts 5,700 credit

Explanation:

first, we solve for the expected uncollectible account of the account receivables

$ 190.000 x 5% = 9,500 accounts receivable

This will be the ending balance of the allowance

as currently has 3,800 we solve for the difference and get the bad debt expense adjustment

9,500 - 3,800 = 5,700