Question

At December 31, Folgeys Coffee Company reports the following results for its calendar year.

Cash sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(900,000

Credit sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000

Its year-end unadjusted trial balance includes the following items.

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . \)125,000 debit

Allowance for doubtful accounts . . . . . . . . . . . . . . . . 5,000 debit

c. Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be 6% of year-end accounts receivable.

Short answer

The amount of bad debt expense will be $12,500 when the organization assumes the uncollectible of 6% of year-end accounts receivables.

Step-by-step solution

Journal entry

Date	Particulars	Debit	Credit
c	Bad debt expense	$12,500
	Allowance for doubtful accounts		$12,500
	(To record the bad debt)

Working notes

Particulars	Amount
Unadjusted balance	$5,000 debit
Add: Estimated balance $\left(\$125,000\times 6\%\right)$	$7,500 credit
Required adjustment	$12,500 credit