Percentage of receivables method-Journal entries
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Jaya Co. uses the percentage of receivables bases to record bad debts expenses and concludes that 2% of accounts receivables will become undcollectible. Accounts receivable are $500,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $1,500.
I must prepare the adjusting journal entry to record bad debts expenses for the year, and if the allowance for doubtful accounts had a debit balance of $600 instead of a credit balance of $1,500, prepare the adjusting journal entry for bad debts expense
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Solution Summary
The answer contains the journal entries to be passed when the company determines doubtful debts on the basis of percentage of receivables.
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Bad debt expense a/c Dr 8,500
To Allowance for doubtful debts 8,500 ...
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