During 2021, its first year of operations, a company provides services on account of $256,000. By the end of 2021, cash collections on these accounts total $133,000. The company estimates that 11% of accounts receivable will be uncollectible. Record the adjustment for uncollectible accounts on December 31, 2021.

The Record for the adjustment for uncollectible accounts on December 31, 2021 would be the following:

31/12/2021                                       Debit  Credit

Bad Debts Expense                  $   9,250.00  

Allowance for doubtful accounts              $  9,250.00

(To record bad debt expense)  

Explanation:

In order to Record the adjustment for uncollectible accounts on December 31, 2021 we would have to make the following calculation:

Bad Debts Expense=(services on account-cash collections)*11%

Bad Debts Expense=($256,000-$133,000)*11%

Bad Debts Expense=$13,5330

Therefore, the journal entry would be the following:

31/12/2021                                       Debit  Credit

Bad Debts Expense                  $   9,250.00  

Allowance for doubtful accounts              $  9,250.00

(To record bad debt expense)  

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