Questions: Warner Company's year-end unadjusted trial balance shows accounts receivable of 106,000, allowance for doubtful accounts of 670 (credit), and sales of 350,000. Uncollectibles are estimated to be 1.50% of accounts receivable. 1. Prepare the December 31 year-end adjusting entry for uncollectibles. 2. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of 650?

To address the questions, we need to calculate the adjusting entry for uncollectibles based on the given information.

Step 1: Calculate the estimated uncollectibles.

Uncollectibles are estimated to be 1.50% of accounts receivable. Therefore, we calculate:

\[ \text{Estimated Uncollectibles} = 1.50\% \times \$106,000 = 0.015 \times \$106,000 = \$1,590 \]

Step 2: Determine the adjusting entry.

The current balance in the Allowance for Doubtful Accounts is a credit of \$670. We need to adjust this to match the estimated uncollectibles of \$1,590.

\[ \text{Required Adjustment} = \$1,590 - \$670 = \$920 \]

Adjusting Entry:

• Debit: Bad Debt Expense \$920
• Credit: Allowance for Doubtful Accounts \$920

Step 1: Calculate the estimated uncollectibles.

The estimated uncollectibles remain the same as calculated before:

\[ \text{Estimated Uncollectibles} = 1.50\% \times \$106,000 = \$1,590 \]

Step 2: Determine the adjusting entry with a debit balance.

If the Allowance for Doubtful Accounts had a debit balance of \$650, we need to adjust it to reach the estimated uncollectibles of \$1,590.

\[ \text{Required Adjustment} = \$1,590 + \$650 = \$2,240 \]

Adjusting Entry:

• Debit: Bad Debt Expense \$2,240
• Credit: Allowance for Doubtful Accounts \$2,240

1. The adjusting entry for uncollectibles with a credit balance of \$670 is:

   • Debit: Bad Debt Expense \$920
   • Credit: Allowance for Doubtful Accounts \$920

2. If the allowance account had a debit balance of \$650, the adjusting entry would be:

   • Debit: Bad Debt Expense \$2,240
   • Credit: Allowance for Doubtful Accounts \$2,240