Reference no: EM132514005

Question - Prepare entry using allowance method. LO8 Massey Ltd uses the allowance method to record bad debts expense and concludes, using the ageing of accounts receivable method, that 1% of accounts receivable will become uncollectable. Accounts receivable are $500 000 at the end of the year, and the allowance for doubtful debts has a credit balance of $3000.

(a) Prepare the adjusting journal entry to record bad debts expense for the year.

(b) If the allowance for doubtful debts had a debit balance of $800 instead of a credit balance of $3000, determine the amount to be reported for bad debts expense.