Question

During its first year of operations, Gehrig Company had credit sales of $3,000,000, of which $400,000 remained uncollected at year-end. The credit manager estimates that $18,000 of these receivables will become uncollectible.
Prepare the journal entry to record the estimated uncollectibles. (Assume an unadjusted balance of zero in Allowance for Doubtful Accounts.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Answer 1

Answer:

The answer of the exercise is attached.

Explanation:

Bad debt expense is an expense account and expense accounts have debit balance. Whenever an expense account is to be increased, it is debited.

Allowance for doubtful debts is a contra asset account and contra asset accounts have credit balance. Whenever a contra asset accounts balance is to be increased, it is credited.

Therefore, to record the estimated uncollectibles, bad debt expense account is debited to book the expense and allowance for doubtful accounts is credited to reduce the balance of accounts receivable.