Question

Triple Tier Bakery is a locally-owned business offering custom cakes, cupcakes, desserts and wedding cakes. At year end, Triple Tier's balance of Allowance for Uncollectible Accounts is $550 (credit) before adjustment. The Accounts Receivable balance is $22,500. During the next year, Triple Tier estimates that 10% of accounts will be uncollectible. Record the adjustment required for Allowance for Uncollectible Accounts?

Answer 1

Answer and Explanation:

The adjusting entry is

Bad Debts expense ($22,500 ×10% - $550) $1,700

           To Allowance for uncollectible accounts $1,700

(Being adjustment for Allowance for Uncollectible Accounts is recorded)

Here bad debt expense is debited as it increased the expense and credited the allowance as it reduced the assets