Question

59) Average Art is a new business. During its first year of operations, credit sales were $40,000 and collections of credit sales were $36,000. One account, $650, was written off. Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible. Prepare the entry to record bad debts expense.

Answer 1

Answer:

Bad debts expense and estimates 800  

Allowance for Doubtful Accts                800

   

Allowance for Doubtful Accts        650  

Accounts receivable account                 650

Explanation:

A=Credit sales 40000

B=Percent-of-sales method to account for bad debts expense and estimates 2%

 

Bad debts expense and estimates = AxB

                                                          =40000x2%

                                                           =800

You must remember to register the writte off. $650.