December 31, 20X1. This balance includes some past due accounts. Based on industry averages, Teddy estimates that $21,520 of the December 31 accounts receivable will become uncollectible. At this time, Teddy Company does not know which customer accounts will become uncollectible.

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Under the allowance method, the Bad Debt Expense account is used to record the amount of accounts receivable a business expects to have to write off in the upcoming year.

The adjusting entry that Teddy Company should record for bad debt expense on December 31, 20X1 is:

12/31/X1	Bad Debt Expense
	Allowance for Doubtful Accounts

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Under the allowance method, the adjusting entry to record bad debt expense is estimated at the end of the period. It will yield an adjusted balance for the Allowance for Doubtful Accounts equal to the estimated amount.

On the income statement, the Bad Debt Expense will be matched against revenues . On the balance sheet, the Allowance for Doubtful Accounts will be subtracted from the balance in Accounts Receivable. This amount is called the net realizable value and represents the amount that the company expects to collect on its accounts receivable.

Teddy Company's Accounts Receivable and Allowance for Doubtful Accounts on December 31, 20X1, before adjusting entries, are shown below. Update these T-accounts for the adjusting entry for Bad Debt Expense, showing the balance in Teddy Company's Accounts Receivable and Allowance for Doubtful Accounts after adjusting entries have been made.

Accounts Receivable
12/31/X1	$392,000
12/31/X1

Allowance for Doubtful Accounts
		1/1/X1	$0
		adjusting entry
		12/31/X1

Determine the amount of Bad Debt Expense that Teddy Company should report in its 20X1 income statement and the net realizable value of Teddy Company's Accounts Receivable after the adjusting entry is made on December 31, 20X1.

Income Statement:
Bad Debt Expense		$
Balance Sheet:
Accounts Receivable, Dec. 31, 20X1		$
Less: Allowance for Doubtful Accounts
Net Realizable Value of Accounts Receivable, Dec. 31, 20X1		$

At a(n) point in the future, specific customer accounts will be determined to be uncollectible. At that point in time, the specific account receivable is written off by debiting and crediting .

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Accounts Receivable is an asset account; Allowance for Doubtful Accounts is a contra asset account that indicates the estimated amount of the accounts receivable that is uncollectiable.

On January 12, 20X2, J. Thorleif's account balance of $5,530 with Teddy Company is determined to be uncollectible. Provide the journal entry to write-off J. Thorleif's account receivable on January 12, 20X2:

1/12/X2

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The write off of all or part of a customer's account reduces the balance in both Accounts Receivable and Allowance for Doubtful Accounts.

Teddy Company's Accounts Receivable and Allowance for Doubtful Accounts on December 31, 20X1, after adjusting and closing entries, are shown below. Update these T-accounts for the write-off of the J. Thorleif account receivable, showing the balance in Teddy Company's Accounts Receivable and Allowance for Doubtful Accounts immediately following the write-off.

Accounts Receivable
12/31/X1
		1/12/X2
1/12/X2

Allowance for Doubtful Accounts
		12/31/X1
1/12/X2
		1/12/X2