A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's una

Question

3 years ago

11

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's una

djusted trial balance reported the following selected amounts: Accounts receivable $ 358,000 debit Allowance for uncollectible accounts 530 debit Net Sales 803,000 credit All sales are made on credit. Based on past experience, the company estimates that 0.3% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Business

1 answer:

const2013 [10] · Answer 1 · 2022-08-09T10:30:09+03:00

Answer:

Debit Bad Debts Expense $2,939; Credit Allowance for Doubtful Accounts $2,939

Explanation:

Estimated Uncollectibles based on the past experience = $803,000 * 0.3%

=$2,409

Debit balance in allowance for doubtful accounts = $530

The total amount of Bad Debts Expense to be provided in the adjusting entry = $2,409 + $530

= $2,939