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Estimating and reporting bad debt
Cash sales... $1,025,000
Credit sales... $1,342,000 Accounts Rec... $575,000 debit Allowance for bad debt... 7,500 credit An aging analysis estimates that 6% of year end accts rec. are uncollectable. How do I prepare an adjusting entry for this? |
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No need to use the cash sales amount.
AR ending balance should be 575000x6%, 7500 of which has accrued. You need to figure out how much more you need to accrue, other than 7500. When you get the number, Dr. Bad Debt expense, Cr. Allowance for doubtful account. |
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