Accounts receivable has a balance of 750,000 and the allowance for doubtful acco

Question

Accounts receivable has a balance of 750,000 and the allowance for doubtful accounts has a debit balance of 600at the end of the current year prior to adjustment. Net credit sales for the current year are 850,000 and 4.5% of net credit sales estimated to be uncollectible. The adjusting entry using the percentage of sales method would require a credit to:
A. allowance for doubtful accounts 600
B. accounts receivable 600
C. dad debt expense 37,650
D. allowance for doubtful accounts 38,850
E. None of the above

Explanation / Answer

D. Allowance for doubtful account $38,850

as: 4.5% of $850,000 + $600

= $38,250 + $600

= $38,850

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