At the end of the first year of operations, Gaur Manufacturing had gross accounts receivable of $348,000. Gaur's management estimates that 7% of the accounts will prove uncollectible. What journal entry should Gaur record to establish an allowance for uncollectible accounts?

Question

Business

Maximilian Woodward

16 January, 04:33

At the end of the first year of operations, Gaur Manufacturing had gross accounts receivable of $348,000. Gaur's management estimates that 7% of the accounts will prove uncollectible. What journal entry should Gaur record to establish an allowance for uncollectible accounts?

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Cailyn Lucero · Answer 1

The journal entry is shown below:

Bad debt expense A/c Dr $24,360

To Allowance for doubtful debts $24,360

(Being bad debt expense is recorded)

The computation of the bad debt expense is shown below:

= Gross accounts receivable * estimated percentage given

= $348,000 * 7%

= $24,360

We debited the bad debt expense and credited the allowance for doubtful debts account so that the correct posting can be done