E8-1 Recording Bad Debt Expense Estimates and Write-Offs Using the Aging of Receivables Method [LO 8-2] At the end of 2013, Blackhorse Productions, Inc., used the aging of accounts receivable method to estimate that its Allowance for Doubtful Accounts should be $19,600. The account had an unadjusted credit balance of $11,000 at December 31, 2013. Prepare journal entries for each transaction. (If no entry is required for a transaction/event, select \"No Journal Entry Required\" in the first account field.) The appropriate bad debt adjustment was recorded for the year 2013. On January 31, 2014, an account receivable for $1,100 from March 2013 was determined to be uncollectible and was written off. Solution Hi, As per the valuation, doubtful debtors as at 31 december 2013 are $19600, where as the allowance for doubtful debts has an unadjusted balance of only $11000. Hence the Company needs to create $8600 as further allowance for bad debts. The first entry would be A) Statement of profit and loss ( allowance for doubtful debts) Debit $8600 Credit To Allowance for doubtful debts account $8600. Post this entry, the balance in doubtful debt account would be $19600 In the Month of January 2014, the Company realised that actual bad debts are $1100. Since the effect of expense was given in the previous year, in the month of Jan, the Company will debit the allowance for doubtful debt account and credit the debtor and remove the debtor out of its books. The entry would be B) Allowance for doubtful debts Debit $1100 Credit to Sundry Debtors ( Debtor name ) $1100. .