Gleim Company uses the income statement approach in estimating uncollectibles. A

Question

Gleim Company uses the income statement approach in estimating uncollectibles. At the end of the year, Gleim Corporation estimates that 3% of its credit sales of $950,000 will be uncollectible. Allowance for Doubtful Accounts has a debit balance of $3,500 before adjustment. The adjusting entry involves a debit to

Bad Debts Expense and a credit to Accounts Receivable for $32,000.

Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $32,000

C.Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $28,500.

D.Bad Debts Expense and a credit to Accounts Receivable for $28,500.

Bad Debts Expense and a credit to Accounts Receivable for $32,000.

Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $32,000

C.Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $28,500.

D.Bad Debts Expense and a credit to Accounts Receivable for $28,500.

Explanation / Answer

Solution: Bad Debts Expense and a credit to Allowance for Doubtful Accounts for $28,500

Eexplanation: 3% of its credit sales of $950,000 = 28,500

The adjusting entry will increase the bad debt expense and credit to Allowance for Doubtful Accounts to increase the contra-asset account

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