Award: 0 out of 3.00 points the unadjusted trial balance at year-end for a compa

Question

Award: 0 out of 3.00 points the unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts: All sales are made on credit. Based on past experience, the company estimate 3.5 percentage of ending account receivable to b uncollectible. What adjusting entry should be the company makes at the end of the current year to record its estimated bad debts expense? Debit Bad Debts Expense dollar 8,050;credit allowance for Doubtful Accounts dollar 8,050. Debit bad Debts Expense dollar 13;425; credit Allowance for doubtful Accounts dollar 13,425. Debit Dad Debts Expense dollar 18,050; credit Allowance for Doubtful Accounts dollar 13,050. Debit Bad Debts expense dollar 14,875; credit Allowance for Doubtful Accounts dollar 14,874. Debit Bad debts Expense dollar 16,325; credit Allowance for Doubtful Accounts dollar 16,325.

Explanation / Answer

The total value of bad debts to be recorded is calculated as follows:

Total Value of Bad Debts = Ending Accounts Receivable*Percentage Uncollectible = 425,000*3.5% = $14,875

The balance in the allowance for doubtful debts will have to be increased by this value as it is having a debit balance. The adjusting journal entry to record the bad debts is given below:

Option E is the answer.

Account Titles Debit Credit Bad Debts Expense (14,875 + 1,450) $16,325 Allowance for Doubtful Debts $16,325

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