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During 2018, its first year of operations, Pave Construction provides services on account of $154,000. By the end of 2018, cash collections on these accounts total $107,000. Pave estimates that 25% of the uncollected accounts will be bad debts. Record the adjustment for uncollectible accounts on December 31, 2018.

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Answer:

Bad debts expenses                                        Debit                $ 11,750

Allowance for uncollectible receivables        Credit                                $ 11,750

Explanation:

The allowance for uncollectible accounts receivables balances are calculated as a percentage of the receivable balance.

The receivable balances as at December 31, 2018 is

Services provided on account                          $  154,000

Cash collections received                                 $  107,000

Receivables from services uncollected           $    47,000

Estimated percentage considered uncollectible     25 %

Allowance for uncollectible accounts   $ 47,000 * 25 % = $ 11,750

abiolataiwo2015

The adjustment for uncollectible accounts on December 31, 2018 is: Debit Bad debts expenses %11,750; Credit Allowance for uncollectible receivables  $11,750.

Adjustment for uncollectible accounts

Pave Construction Journal entry

Debit Bad debts expenses                                               $ 11,750

Credit Allowance for uncollectible receivables               $ 11,750

[($154,000- $107,000)× 25 %]

(To record Adjustment for uncollectible accounts)

Inconclusion the adjustment for uncollectible accounts on December 31, 2018 is: Debit Bad debts expenses %11,750; Credit Allowance for uncollectible receivables  $11,750.

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