Use the following information to answer the next two questions: Q14 and Q15. The Cavallas Co. had the following balances in selected accounts on 12/31/10. Balances in Selected Accounts: Account Debit Credit Accounts receivable 100,000 Allowance for doubtful accounts 1,000 Bad Debt Expense 0 Sales 500,000 Sales returns 50,000 14. The company estimates that 4% of Accounts Receivable will never be collected. The adjusting journal entry to record the estimate of bad debt expense is:

Debit bad debt with $4,000, and credit Accounts receivable also with $4,000.

Explanation:

New bad written off = Accounts receivable × 4% = $100,000 × 4% = $4,000

The journal entries will be as follows:

Details                                            Dr ($)                 Cr ($)          

Bad debt                                        4,000

Accounts receivable                                                4,000

Being a bad written off the accounts receivable                      

first one

explanation: