Question

Allowance for Doubtful Accounts has a debit balance of $2,500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of credit sales. If net credit sales are $800,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is:_____________.
A) $34,500
B) $32,000
C) $29,500

Answer 1

Answer:

$34,500.00

Explanation:

Currents balance on the allowance for doubtful debts account is a debit balance of $2500.00. ( negative balance)

Sales volume $ 800,000.

Bad debt expense is 4 %. i.e 4/100= 0.04

Bad debt expense =0.04 x 800,000=32,000.

Add debt balance =$ 32,000.00 + $ 2,500.00

       =$34,500.00