Question

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? a. Bad Debt Expense65,000 Allowance for Doubtful Accounts65,000 b. Bad Debt Expense19,500 Allowance for Doubtful Accounts19,500 c. Bad Debt Expense22,000 Allowance for Doubtful Accounts22,000 d. Bad Debt Expense17,000 Allowance for Doubtful Accounts17,000

Answer 1

Answer:

d.                                                          Debit       Credit

Bad Debt Expense                           $17,000  

Allowance For Doubtful Accounts                    $17,000

Explanation:

Estimates of uncollectible ( $390,000× 5%) =     $19,500

Less: Allowance For Doubtful Accounts Credit= ($2500)

Bad Debt Expense=                                                $17,000