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natima [27]
3 years ago
6

Flash Co. uses the allowance method to account for bad debts. At the end of 2010, Flash Co.'s unadjusted trial balance shows an

accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. Based on history, Flash estimates that bad debts will be 0.5% of sales. The entry to record estimated bad debts will include an debit to Bad Debts Expense in the amount of:
Business
2 answers:
nevsk [136]3 years ago
4 0

Answer:

7500

Explanation:

Deffense [45]3 years ago
3 0

Answer:

$7,500

Explanation:

Data given in the question

Balance of the account receivable = $45,000

Allowance for doubtful account balance = $400 debit

Sales = $1,500,000

Estimated percentage is 0.5% of sales

So, the estimated bad debt expense is

= Sales revenue × estimated percentage

= $1,500,000 × 0.5%

= $7,500

The journal entry is as follows

Bad debt expense A/c Dr  $7,500

  To Allowance for doubtful debts  $7,500

(Being bad debt expense is recorded)

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