Farr Co. elects to use the percentage-of-sales basis in 2017 to record bad debt

ID: 2585068 • Letter: F

Question

Farr Co. elects to use the percentage-of-sales basis in 2017 to record bad debt expense. It estimates that 4% of net credit sales will become uncollectible. Sales revenues are $880,000 for 2017, sales returns and allowances are $43,900, and the allowance for doubtful accounts has a credit balance of $9,200.

Prepare the adjusting entry to record bad debt expense in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Explanation / Answer

SOLUTION:

Dr. Bad debt expense $33,444

Cr. Allowance for doubtful accounts $33,444

Working:

Sales

880,000

Sales return

43900

Net sales

836,100

Uncollectible

33444