During 2021, its first year of operations, a company provides services on account of $256,000. By the end of 2021, cash collections on these accounts total $133,000. The company estimates that 11% of accounts receivable will be uncollectible. Record the adjustment for uncollectible accounts on December 31, 2021.

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Business

Prego

14 January, 10:42

During 2021, its first year of operations, a company provides services on account of $256,000. By the end of 2021, cash collections on these accounts total $133,000. The company estimates that 11% of accounts receivable will be uncollectible. Record the adjustment for uncollectible accounts on December 31, 2021.

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Sariah Duarte · Answer 1

The Record for the adjustment for uncollectible accounts on December 31, 2021 would be the following:

31/12/2021 Debit Credit

Bad Debts Expense $ 9,250.00

Allowance for doubtful accounts $ 9,250.00

(To record bad debt expense)

Explanation:

In order to Record the adjustment for uncollectible accounts on December 31, 2021 we would have to make the following calculation:

Bad Debts Expense = (services on account-cash collections) * 11%

Bad Debts Expense = ($256,000-$133,000) * 11%

Bad Debts Expense=$13,5330

Therefore, the journal entry would be the following:

31/12/2021 Debit Credit

Bad Debts Expense $ 9,250.00

Allowance for doubtful accounts $ 9,250.00

(To record bad debt expense)