Warner Company’s year-end unadjusted trial balance shows accounts receivable of $113,000, allowance for doubtful accounts of $740 (credit), and sales of $420,000. Uncollectibles are estimated to be 1.50% of accounts receivable.

1. Prepare the December 31 year-end adjusting entry for uncollectibles.
2. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of $1,000?

The answer is given below;

Explanation:

1- Allowance for doubtful accounts $113,000*1.5%=$1,695

  Allowance for doubtful accounts-opening         =($740)

Bad Debt Expense for the year                                 $955

Bad Debt Expense Dr.$955

Accounts Receivable Cr.$955

2.Bad Debt Expense=$1,695+1,000)=$2,695

Bad Debt Expense Dr.$2,695

Accounts Receivable Cr.$2,695

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