Warner Company’s year-end unadjusted trial balance shows accounts receivable of $117,000, allowance for doubtful accounts of $780 (credit), and sales of $460,000. Uncollectibles are estimated to be 1.50% of accounts receivable. 1. Prepare the December 31 year-end adjusting entry for uncollectibles.

Dr Bad debts expense$975

Cr Allowance for Doubtful Accounts $975

Explanation:

Warner Company’s December 31 year-end adjusting entry for uncollectibles

Dr Bad debts expense$975

Cr Allowance for Doubtful Accounts $975

(117,000*1.50%)-780

=$1,755-$780

=$975

Debit Bad debt expenses with $1,755; and credit Allowance for doubtful accounts also with $1,755.

Explanation:

Bad debt expenses = Receivables × Uncollectable percentage = $117,000 × 1.5% = $1,755

The adjusting entries will be as follows:

Details                                                   Dr ($)              Cr ($)  

Bad debt expenses                               1,755

aAllowance for doubtful accounts                               1,755

To record the estimated uncollectable amount.