Question

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. Accounts receivable $ 435,000 Debit Allowance for Doubtful Accounts 1,250 Debit Net Sales 2,100,000 Credit All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Answer 1

Answer:

bad debt expense 21,000 debit

Allowance for Doubtful Accounts 21,000 credit

Explanation:

"uses the percent of sales method to determine its bad debts expense. "

This means 1% of sales is the ammount of bad debt expense we don't have to calculate a further adjustment.

2,100,000 x 1% = 21,000