Question

Grey Corporation has $100,000 of accounts receivable on December 31, 2015. The unadjusted balance of its Allowance for Doubtful Accounts is a credit of $1,000. Experience suggests 5 percent of its receivables will be uncollectible. The amount that should be debited to Bad Debt Expense and credited to Allowance for Doubtful Accounts in the year-end adjusting entry is _____.a.$50b.$1,000c.$2,070d.$5,000e. $6,000f. $4,000

Answer 1

Answer:

4,000

Explanation:

expected uncollectible 5% of Ar

5% of 100,000 = 5,000

current balance  (1,000 credit)

Adjustment 4,000

When the uncolelctibles are made base on account receivable, the amount calculate is the ending balance and we should calculate the adjustment  by the diference between beginning balance and ending balance

If the allowance is made based on sales then weshould adjust for the whole amount of the expected bad debt