00:01
Duncan company reports the following financial information before adjustments.
00:06
Debets and credits, accounts receivable $100 ,000, allowance for doubtful accounts, $2 ,000, sales revenue all on credit, $900 ,000, sales returns and allowances $50 ,000.
00:17
Prepare the journal entry to record bad debt expense, assuming duncan company estimates bad debts at a, 5 % of accounts receivable, and b, 5 % of accounts receivable, but allowance for doubtful accounts had a $1 ,500 debit balance.
00:32
So for part a, bad debt expense, we are told that it's 5 % of accounts receivable, and we're given the account receivable amount right here.
00:51
5 % is a decimal.
00:53
Remember to convert percentages to decimals, you just divide that number by 100.
00:57
So i get 0 .05 times 100 ,000, and then i have to subtract the allowance for doubtful accounts, which is given to us right here at $2 ,000.
01:16
$0 .05 times $100 ,000 is $5 ,000 minus $2 ,000, which gives us $3 ,000.
01:26
So now we're going to go ahead and create the journal entry, and we have our account title and explanation, our debit, and our credit.
01:48
The account title and explanation, we have bad debt expense that we are debiting for $3 ,000 because that's what we just calculated back here.
02:04
And then we have our allowance for doubtful accounts that we are crediting for 3 ,000.
02:20
So remember when you create a journal entry, your debits and your credits should balance each other out.
02:28
And they do 3 ,000 and 3 ,000.
02:31
And this is to record bad debt expense.
02:43
And now we're going to go ahead and do part b...