Brief Exercise 8-6

Pina Colada Corp. uses the percentage-of-receivables basis to record bad debt expense. It estimates that 3% of accounts receivable will become uncollectible. Accounts receivable are $429,000 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,010.

a. Prepare the adjusting journal entry to record bad debt expense for the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

b. If the allowance for doubtful accounts had a debit balance of $830 instead of a credit balance of $2,010, determine the amount to be reported for bad debt expense.