Question

Use the information presented in BE7-5 for Wilton, Inc.

(a) Instead of an Allowance for Doubtful Accounts Balance of \(2,400 credit, the balance was \)1,900 debit. Assume that 10% of accounts receivable will prove to be uncollectible. Prepare the entry to record bad debt expenses.

(b) Instead of estimating uncollectible based on a percentage of receivables, assume Wilton prepares an aging schedule that estimates total uncollectible accounts at \(24,600. (Assume an allowance of \)2,400 credit.) Prepare the entry to record bad debt expenses.

BE7-5 (L03) Wilton, Inc. had net sales in 2017 of \(1,400,000. At December 31, 2017, before adjusting entries, the balances in selected accounts were Accounts Receivable \)250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 8% of its receivables will prove to be uncollectible, prepare the December 31, 2017, journal entry to record bad debt expense.

Short answer

(a) Bad debt expenses:$26,900.

(b) Bad debt expenses:$22,200.

Step-by-step solution

Definition of Accounts Receivables

Accounts receivables is an account that usually includes credit sales made by the business entity for which the debtor has not made payment. It is reported in the balance sheet on its net realizable value.

Journal entry for bad debt expenses

Date	Accounts and Explanation	Debit $	Credit $
31 Dec 2017	Bad Debt expenses $\left[\left(\$250,000\times 10\%\right)+\$1,900\right]$	$26,900
	Allowance for doubtful accounts		$26,900

Journal entry for bad debt expenses

Date	Accounts and Explanation	Debit $	Credit $
31 Dec 2017	Bad Debt expenses $\left(\$24,600-\$2,400\right)$	$22,200
	Allowance for doubtful accounts		$22,200