A company uses the percent of sales method to determine its bad debts expense. A

ID: 2519010 • Letter: A

Question

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts:

All sales are made on credit. Based on past experience, the company estimates 0.6% 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 $2,738; credit Allowance for Doubtful Accounts $2,738.

Debit Bad Debts Expense $4,168; credit Allowance for Doubtful Accounts $4,168.

Debit Bad Debts Expense $5,408; credit Allowance for Doubtful Accounts $5,408.

Debit Bad Debts Expense $4,788; credit Allowance for Doubtful Accounts $4,788.

Debit Bad Debts Expense $2,118; credit Allowance for Doubtful Accounts $2,118.

Accounts receivable $ 353,000 Debit Allowance for doubtful accounts 620 Debit Net sales 798,000 Credit

Explanation / Answer

Debit Bad Debts Expense $4,788; credit Allowance for Doubtful Accounts $4,788.(798000*0.6%)

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A company uses the percent of sales method to determine its bad debts expense. A

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A company uses the percent of sales method to determine its bad debts expense. A

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