Question

A trial balance before adjustment included the following: Debit Credit Accounts receivable $120,000 Allowance for doubtful accounts 730 Sales $510,000 Sales returns and allowances 8,000 Give journal entries assuming that the estimate of uncollectibles is determined by taking (1) 5% of gross accounts receivable and (2) 1% of net sales.

Answer 1

Answer and Explanation:

The journal entries are as follows:

a. Allowance for doubtful debts Dr. $5,270 ($120,000 × 5% - $730)

To Accounts Receivables $5,270

(Being allowance for doubtful debts is recorded)

Here the allowance for doubtful debt is debited as it increased the assets and credited the account receivable as it decreased the assets

2. Allowance for doubtful debts Dr. $4,290 ($510,000 × 1% - $730)

To Accounts Receivables $4,290

(Being allowance for doubtful debts is recorded)

Here the allowance for doubtful debt is debited as it increased the assets and credited the account receivable as it decreased the assets