Response to the following problem:
At the end of 20-3, Martel Co. had $410,000 in Accounts Receivable and a credit balance of $300 in Allowance for Bad Debts. Martel has now been in business for three years and wants to base its estimate of uncollectible accounts on its own experience.
REQUIRED:
Assume that Martel Co.'s adjusting entry for bad debt expense on December 31, 20-2, was a debit to Bad Debt Expense and a credit to Allowance for Bad Debts of $25,000.
(a) Estimate Martel's uncollectible accounts percentage based on its actual bad debt experience during the past two years.
(b) Prepare the adjusting entry on December 31, 20-3, for Martel Co.'s bad debt expense.