Ok I am so lost I keep trying to get this down pat but it keeps coming up wrong on my end ... please help!!!!!


Use: The percent of accounts recv. method to estimate bad debts ---
One Dec 31 2005 - outstanding accts recv of $55,000 with 2% estimated to be uncollectable.

Then I have to prepare the adjusting entry to record these bad debts expense for the the year with the assumption that the allowance for "doubtful accounts" has the following:

#1 - A $415.00 credit balance before the adjustment
#2 - A $291 debit balance before the adjustments

Now what I can get so far is
Dec 31, 2005 - Bad Debts Expense -- Debit - $1,100
Dec 31, 2005 - Allowance for Doubtful Accounts - $1,100
To record estimated bad debts

But that is it I have tried to do the second part and it looks all wrong
Someone please HELP!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!

goldenbutterfly

The result of the % of accounts receivable is the required balance of Allowance for Doubtful Accounts. Allowance for Doubtful Accounts is a contra-asset account which has its normal balance on the credit side.

$1,100 is the required ending balance of Allowance for Doubtful Accounts. You can now make the adjustments to make 1) the credit balance of $415 and 2) the debit balance of $291 meet the required credit balance of $1100.

Send us your answers and we'll check.

vaemt

Sorry I should have thought to put my answer down!

Ok this is what my journal entry looks like:

Dec 31, 2005 - Doubtful Accts before adjustment - Credit - $415.00
Dec 31, 2005 - Doubtful Accts before adjustment - Debit - 291.00

That is all I have .. that is why it looks so incorrect to me, thank you for taking the time to help me!

goldenbutterfly

Sorry, i am kinda confused with your answer I believe that #1 and #2 are two separate questions.

#1 Since you already have 415 in the credit balance of allowance, you will only need an additional 685 to meet the 1,100 required balance.

dr. Bad Debts Expense 685
cr. Allowance for doubtful accounts 685

#2 Since you have a debit balance of 291, you have to make an adjustment of 1391 to meet 1,100 on the credit side

dr. Bad Debts Expense 1391
cr. Allowance for doubtful accounts 1391

Hope these help!

vaemt

Thats is ok! Thank you so much!