Sage, Inc. had net sales in 2017 of $1,432,200. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable $325,000 debit, and Allowance for Doubtful Accounts $3,000 credit. If Sage estimates that 8% of its receivables will prove to be uncollectible.

Prepare the December 31, 2017, journal entry to record bad debt expense.

Debit Bad debts expense $23,000

Credit Allowance for Doubtful Accounts $23,000

Explanation:

At December 31, 2017,

Bad debts is estimated:

8% x $325,000 = $26,000

Before adjusting, Allowance for Doubtful Accounts $3,000 credit. The company use aging method to estimate bad debts expense and Allowance for Doubtful Accounts. Bad debts expense amount will be record:

$26,000 - $3,000 = $23,000

The Journal entry:

Debit Bad debts expense $23,000

Credit Allowance for Doubtful Accounts $23,000