The following selected amounts are reported on the year-end unadjusted trial bal

Question

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense.

Accounts receivable $ 438,000 Debit
Allowance for Doubtful Accounts 1,280 Debit
Net Sales 2,130,000

Credit All sales are made on credit. Based on past experience, the company estimates 1.0% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Debit Bad Debts Expense $20,020; credit Allowance for Doubtful Accounts $20,020.
Debit Bad Debts Expense $22,580; credit Allowance for Doubtful Accounts $22,580.
Debit Bad Debts Expense $21,300; credit Allowance for Doubtful Accounts $21,300.
Debit Bad Debts Expense $4,380; credit Allowance for Doubtful Accounts $4,380.
Debit Bad Debts Expense $5,660; credit Allowance for Doubtful Accounts $5,660.

Explanation / Answer

journal entry will be =>

Debit Bad Debts Expense $21,300

credit Allowance for Doubtful Accounts $21,300

Toatal Balnce of Allowance for Doubtful Accounts => 21300- 1280 => $ 20020 (Credit)

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