Samson Corporation had sales of $1,000,000 during 2006, of which 80 percent were
ID: 2559266 • Letter: S
Question
Samson Corporation had sales of $1,000,000 during 2006, of which 80 percent were on credit. On December 31, 2006, Accounts Receivable totaled $80,000 and Allowance for Bad Debts had a debit balance of $1,200. Given this information, if uncollectible receivables are estimated to be 3 percent of accounts receivable, the adjusting entry as of December 31, 2006, to account for bad debts would include a
a.
Debit to Bad Debt Expense of $1,200
b.
Debit to Bad Debt Expense of $2,400
c.
Debit to Bad Debt Expense of $3,600
d.
Credit to Allowance for Bad Debts of $2,400
a.
Debit to Bad Debt Expense of $1,200
b.
Debit to Bad Debt Expense of $2,400
c.
Debit to Bad Debt Expense of $3,600
d.
Credit to Allowance for Bad Debts of $2,400
Explanation / Answer
a. debit to bad debt expense of $1,200..
the following is the adjusting entry:
.bad debt expense a/c...................dr..........$1,200.
................To Allowance for bad debts .........................$1,200.
(3% of receivables mean = $80,000*3%=>$2,400)
but allowance for bad debts already has $1,200 balance.
=> new balance = $2,400 - $1,200 =>$1,200.
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