Question

Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.

c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $100 debit.

Short answer

The amount of bad debt expense considering a debit balance of $100 in allowance for doubtful accounts will be $11,920.

Step-by-step solution

Adjusting journal entry

Date	Particulars	Debit	Credit
Dec 31	Bad debt expense	$11,920
	Allowance for doubtful accounts		$11,920
	(To record the bad debt expense)

Working notes

Particulars	0	1 to 30	31 to 60	61 to 90	Over 90
Accounts receivables	$396,000	$90,000	$36,000	$18,000	$30,000
Multiply: Percent uncollectible	1%	2%	5%	7%	10%
Allowance for doubtful accounts	$3,960	$1,800	$1,800	$1,260	$3,000

$\begin{array}{rcl}\mathbf{Baddebtexpense}& \mathbf{=}& \mathbf{Estimateduncollectible}\\ & & \mathbf{+}\mathbf{Debitbalanceinallowancefordoubtfulaccounts}\\ & \mathbf{=}& \left(\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{960}\mathbf{+}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{800}\mathbf{+}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{800}\mathbf{+}\mathbf{\$}\mathbf{1}\mathbf{,}\mathbf{260}\mathbf{+}\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{000}\right)\mathbf{+}\mathbf{\$}\mathbf{100}\\ & \mathbf{=}& \mathbf{\$}\mathbf{11}\mathbf{,}\mathbf{820}\mathbf{+}\mathbf{\$}\mathbf{100}\\ & \mathbf{=}& \mathbf{\$}\mathbf{11}\mathbf{,}\mathbf{920}\\ & & \end{array}$