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Accounts receivable and bad debt journal entries

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Prepare example journal entries to account for transactions related to accounts receivable and bad debt using both percentage of sales and the percentage of receivables methods.

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Here are the two classic entries needed:

Estimate bad debts:
......................................DEBIT.............CREDIT
Bad debt expense.....................XX
Allowance for doubtful accounts........................XX

Write off account:
Allowance for doubtful ...

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The solution provides the accounts receivable and bad debt journal entries.

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Journal entry for bad debt expense

1. A company had a normal balance of $10,000 in its Accounts Receivable account, and a normal balance of $500 in its Allowance for Doubtful Accounts account. During the year it had $500,000 in sales. At the end of the year it determined that 3.5% of sales would be uncollectible.

Required:
a. Prepare the adjusting entry that records bad debts expense.
b. Prepare the journal entry that records a write-off of a $700 uncollectible account receivable.

2. What are the purposes of making an adjusting entry for expected bad debts, and the use of the Allowance for Doubtful Accounts account? Narratives about your prior or current experience with bad debts are welcome.

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