Question

Warner Company’s year-end unadjusted trial balance shows accounts receivable of \(99,000, allowance for doubtful accounts of \)600 (credit), and sales of $280,000. Uncollectibles are estimated to be 0.5% of sales. Prepare the December 31 year-end adjusting entry for uncollectibles.

Short answer

The amount of bad debt expense in the year-end adjusting entryfor the uncollectible will be calculated by deducting the amount of uncollectibleand the amount of allowance for doubtful accounts.

Step-by-step solution

Working notes

$\begin{array}{rcl}\mathrm{Bad}\mathrm{debt}\mathrm{expense}& =& \left(\mathrm{Sales}\times \mathrm{Percentage}\mathrm{of}\mathrm{uncollectible}\right)-\mathrm{Allowance}\mathrm{for}\mathrm{doubtful}\mathrm{accounts}\\ & =& \left(\$280,000\times \frac{0.5}{100}\right)-\$600\\ & =& \$1,400-\$600\\ & =& \$800\end{array}$

Journal entry

Date	Particulars	Debit	Credit
December 31	Bad debt expense	$800
	Allowance for doubtful accounts		$800
	(To record the bad debt expense)