The trial balance before adjustment of Cyncrewd Inc. shows the following balances:

Required:

a. Give the entry for bad debt expense for the current year assuming:
• The allowance should be 4% of gross accounts receivable.
• Historical records indicate that based on accounts receivable aging the following statistics apply:

• Allowance for doubtful accounts is $2,340, but it is a credit balance, and the allowance should be 2% of gross accounts receivable.

b. What could account for the unadjusted debit balance in the AFDA account for $2,340?

Transcribed Image Text:

Accounts receivable Allowance for doubtful accounts (AFDA) Credit sales Sales returns Dr. Cr. $225,000 2,340 375,000 35,000