Martel Co. has $320,000 in Accounts Receivable on December 31, 20-1, the end of its first year

Question:

Martel Co. has $320,000 in Accounts Receivable on December 31, 20-1, the end of its first year of operations. The business is new, so it has no prior experience with uncollectible accounts. In Martel’s overall industry, the percentage of uncollectible accounts receivable is about 3%. For companies similar to Martel in size and operations, the percentage is about 5%. Martel decides to use the overall industry experience as the basis for its estimate of uncollectible accounts.

REQUIRED

Prepare the adjusting entry on December 31, 20-1 for Martel Co.’s bad debt expense.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...