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khlwilliams
Aug 25, 2013, 10:08 PM
If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.

pready
Aug 26, 2013, 06:39 AM
For number 1 you have to take net sales during the year times 0.75% to get the amount that should be in your allowance for doubtful accounts. For number 2 take your accounts receivable amount at Dec 31 times 6% to get the amount that should be in your allowance for doubtful accounts.

Since you have a debit balance of $200 you need to add this to the amounts in 1 and 2 calculated above.

Now you have the amounts needed to do the adjusting entry, which is:
Debit Bad Debt Expense and Credit Allowance For Doubtful Accounts for the amounts calculated above.