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At the end of 20-2, Martel Co. had $380,000 in Accounts Receivable and a debit balance of $6,000 in Allowance for Bad Debts. Because it has been operating for only two years, Martel once again wants...

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At the end of 20-2, Martel Co. had $380,000 in Accounts Receivable and a debit balance of $6,000 in Allowance for Bad Debts. Because it has been operating for only two years, Martel once again wants to base its estimate of uncollectible accounts on the industry average or the experience of similar companies. The industry and similar company percentages for the year were the same as in 20-1.
REQUIRED
Based on Martel Co.’s experience in 20-2, select the most appropriate basis (industry or similar company) for estimating its uncollectible accounts for 20-2. Prepare the adjusting entry on December 31, 20-2 for Martel Co.’s bad debt expense.
Answered Same Day Dec 29, 2021

Solution

David answered on Dec 29 2021
113 Votes
Computation of Bad debt expenses:
Accounts Receivable $380,000
Similar companies – percentage of Uncollectible 5%
Uncollectible expected $19,000 ($380,000 x 5%)
Add: Debit balance in Allowance for Uncollectible accounts $ 6,000
Bad debt expense for the year $25,000
...
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