Blackhorse Productions, Inc., used the aging of accounts receivable method to estimate that its Allowance for Doubtful Accounts should be $19,400. The account had an unadjusted credit balance of $12,000 at that time. Required: a. Prepare journal entries for each of the following. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) b. The appropriate bad debt adjustment was recorded. Later, an account receivable for $1,200 was determined to be uncollectible and was written off.

The journals to be recorded are as follows:

Debit Bad debt expense ($19,400 - $12,000)                     $7,400

Credit Allowance for Doubtful Accounts                             $7,400

(To recognize bad debt expense during the period)

Debit Allowance for Doubtful Accounts                               $1,200

Credit Accounts Receivable                                                  $1,200

(To recognize write-off of accounts receivable during the period)

Explanation:

The aging method for accounting for accounts receivable is a technique for estimating the amount of accounts receivable that is deemed as uncollectible. It is usually arrived at by assigning different credit risk percentage to the aged accounts receivable. The buckets are usually: Not Due, 1 - 30 days, 31 - 60 days, and over 60 days.

(a) The bad debt expense above was arrived at by deducting the unadjusted credit balance of $12,000 from what the allowance account should be ($19,400).

(b) The write-off of $1,200 is a write-off of the accounts receivable against the allowance for doubtful accounts.

answer; encouraging the development of innovations by firms attempting to break a monopoly; (creative destruction)