Oriole company reports the following financial information before adjustments. - dr. cr. accounts receivable $130,100 allowance for doubtful accounts $3,310 sales revenue (all on credit) 808,500 sales returns and allowances 52,830 prepare the journal entry to record bad debt expense assuming oriole company estimates bad debts at (a) 4% of accounts receivable and (b) 4% of accounts receivable but allowance for doubtful accounts had a $1,490 debit balance.

(a) 4% of accounts receivable

Dr Bad Debt Expense$ 35,001  

Cr Allowance for Uncollectible Accounts  $ 35,001

Dr Bad Debt Expense$ 39,801  

Cr Allowance for Uncollectible Accounts  $ 39,801

Explanation:

Initial Balance  

Dr Accounts Receivable  $ 130,100

Cr Allowance for Uncollectible Accounts  $ 3,310

Sales Revenue (all on credit)  

Dr Accounts Receivable  $ 880,500  

Cr Sales  $ 880,500

Sales Returns and Allowances    

Dr Sales Returns and Allowances$ 52,830  

Cr Accounts Receivable  $ 52,830

Oriole Company estimates bad debts at (a) 4% of accounts receivable  

Dr Bad Debt Expense$ 35,001  

Cr Allowance for Uncollectible Accounts  $ 35,001

To register the adjustment of 4% of accounts receivables it's necessary considerate the values previously recorded in the account.

It means, CREDIT Balance $3,310 and to register the difference.

4% of accounts receivable but Allowance for Doubtful Accounts had a $1,490 debit balance.  

Dr Allowance for Uncollectible Accounts  $ 1,490

Dr Bad Debt Expense$ 39,801  

Cr Allowance for Uncollectible Accounts  $ 39,801

If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % of accounts receivables as CREDIT.  

Because the company has a debit balance in that account it's necessary to register an entry that compensate the DEBIT value and reflect A CREDIT estimated as % of account receivable.  

FINAL Balance  

Dr Accounts Receivable  $ 957,770  

Cr Allowance for Uncollectible Accounts  $ 38,311

Bad accounts are those credits granted by the company and there is no possibility of being charged.

When customers buy products on credits but the company cannot collect the debt, then it's necessary to cancel the unpaid invoice as uncollectible."

One way is to directly cancel bad debts at the time it was decided that the credit is bad, the total amount reported as bad debt expenses negatively affect the income statement and the accounts receivable are reduced by the same amount, less assets

The other way is to determine a percentage of the total amount of accounts receivable as bad debts, there are many ways to analyze accounts receivable and calculate the value of bad debts.

When the company has the percentage of uncollectible accounts, the required journal entry is Bad Expenses (debit) with Reserve for Bad Accounts (credit)

At the time of cancellation, since the expenses were recognized before, we only use the Allowance for Uncollectible Accounts (Debit)  with accounts receivable (credit), with this we are recognizing the bad credit of the company.

answer; false pretense;

answermarginal cost;