Siew Lan uses the allowance method to record bad debts expense. When accounts receivable is aged at the end of December, it is estimated that 2% of Siew Lan's accounts receivable will be uncollectable.
Accounts receivable at 31 December are $300,000 and the Allowance for doubtful debts has a credit balance of $5,000.
Required:
(a) Prepare the adjusting journal entry to record bad debts expense for the year ended 31 December.
(b) Determine the amount of the bad debts expense if the balance in the Allowance account is a debit of $500 instead of a credit of $5,000.

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The Answer of Siew Lan uses the allowance method to record bad debts expense. When accounts receivable is aged at the end of December, it is estimated that 2% of Siew Lan's accounts receivable will be uncollectable.
Accounts receivable at 31 December are $300,000 and the Allowance for doubtful debts has a credit balance of $5,000.
Required:
(a) Prepare the adjusting journal entry to record bad debts expense for the year ended 31 December.
(b) Determine the amount of the bad debts expense if the balance in the Allowance account is a debit of $500 instead of a credit of $5,000.

Siew Lan Uses the Allowance Method to Record Bad Debts