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1. Prepare the journal entry to record the defaulted account.

Account and Explanation

Debit

Credit

Record write-off of defaulted account

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2. Prepare the adjusting entry to record the bad debt expense for 2013.

Account and Explanation

Debit

Credit

Record adjusting entry for bad debt expense estimate

Clarissa Company has credit sales of $550,000 during 2013 and estimates at the end of 2013 that 2.5% of these credit sales will eventually default. Also, during 2013 a customer defaults on a $775 balance related to goods purchased in 2012. Prior to the write-off for the $775 default, Clarissa's accounts receivable and allowance for doubtful accounts balances were $402,000 and $129 (credit), respectively.