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Pincus Associates uses the allowance method to account for bad debts. 2024 was the first year of operations for Pincus, so it had a $0 opening balance in its allowance for uncollectible accounts. During 2024, Pincus provided a total of $126,000 of services on account. In 2024, the company wrote off uncollectible accounts of $5,100. By the end of 2024, cash collections on accounts receivable totaled $107,100. Pincus estimates that 10% of the accounts receivable balance at 12/31/2024 will prove uncollectible.
Pincus Associates uses the allowance method to account for bad debts. 2024 was the first year of operations for Pincus, so it had a $0 opening balance in its allowance for uncollectible accounts. During 2024, Pincus provided a total of $126,000 of services on account. In 2024, the company wrote off uncollectible accounts of $5,100. By the end of 2024, cash collections on accounts receivable totaled $107,100. Pincus estimates that 10% of the accounts receivable balance at 12/31/2024 will prove uncollectible.Required:
What journal entry should Pincus record to recognize bad debt expense for 2024?
Pincus Associates must record a journal entry to account for bad debt expense, which is done by debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts for $1,890, based on an estimated 10% uncollectibility rate on the remaining $18,900 Accounts Receivable balance.Pincus Associates needs to record a journal entry for bad debt expense for the year 2024 using the allowance method. The calculation is based on the estimated percentage of uncollectible accounts, which is 10% of the Accounts Receivable balance at the end of the year.At the end of 2024, Pincus Associates has provided a total of $126,000 of services on account. After cash collections of $107,100, the remaining Accounts Receivable balance is $18,900 ($126,000 - $107,100). Considering that Pincus estimates 10% of this balance will be uncollectible, the end-of-year allowance for doubtful accounts should be $1,890 ($18,900 x 10%).The journal entry to record the bad debt expense at the end of 2024 is as follows:Debit Bad Debt Expense: $1,890Credit Allowance for Doubtful Accounts: $1,890This entry increases the expense on the income statement and the contra-asset account on the balance sheet, reflecting the estimation that some receivables will not be collected....