Answer:
Adjusting entry to record the estimated uncollectible accounts receivable is:
Debit Bad debt expense $8,500
Credi Allowance for doubtful accounts $8,500
(To record bad debt expense for the year)
Explanation:
The company uses percentage of credit sale to arrive at an estimated amount of accounts receivable that is deemed irrecoverable.
3% of credit sales of $300,000 = $9,000
Since there is an existing credit balance of $500 in the allowance for doubtful accounts, in order to reinstate the balance in that account to $9,000, we need to remove the existing balance from the calculated estimate. Therefore, $9,000 - $500 = $8,500 becomes the necessary adjustment to Bad debt expense.
