At the beginning of the year, Mitchum Enterprises allows for estimated uncollectible accounts of $21,400. By the end of the year, actual bad debts total $25,000.Required:1. Record the write-off to uncollectible accounts. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)2. What is the balance of Allowance for Uncollectible Accounts?
Question
At the beginning of the year, Mitchum Enterprises allows for estimated uncollectible accounts of 25,000.Required:1. Record the write-off to uncollectible accounts. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)2. What is the balance of Allowance for Uncollectible Accounts?
Solution
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To record the write-off to uncollectible accounts, you would make the following journal entry:
Debit (increase) Bad Debt Expense: 25,000
This entry recognizes the bad debts that have actually occurred during the year.
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The balance of the Allowance for Uncollectible Accounts would be calculated as follows:
Beginning balance: 25,000
This would result in a negative balance of $3,600. However, in practice, a negative balance in the Allowance for Uncollectible Accounts is not typically shown. Instead, the company would likely make an adjusting entry at the end of the year to increase the allowance account to an appropriate level based on the company's estimate of future bad debts.
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