Question

At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2017, it has outstanding accounts receivable of \(55,000, and it estimates that 2% will be uncollectible.

Prepare the adjusting entry to record bad debts expense for year 2017 under the assumption that the Allowance for Doubtful Accounts has

1. a \)415 credit balance before the adjustment

Short answer

The adjusting journal entry is passed at the end of eachfinancial year in every organization to adjust the balances in the middle of transactions to close the accounts.

Step-by-step solution

Adjusting journal entry

Date	Particulars	Debit	Credit
2017	Bad debt expense	$685
	Allowance for doubtful accounts		$685
	(To record the bad debt expense)

Working notes

Particulars	Amount
Unadjusted balance	$415
Less: Estimated uncollectible	$1,100
Bad debt expense	$685