Assume Simple Co. had credit sales of $247,000 and cost of goods sold of $147,000 for the period. Simple uses the percentage of

Question

3 years ago

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Assume Simple Co. had credit sales of $247,000 and cost of goods sold of $147,000 for the period. Simple uses the percentage of

credit sales method and estimates that 2 percent of credit sales would result in uncollectible accounts. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $220. What amount of Bad Debt Expense would the company record as an end-of-period adjustment?

Business

1 answer:

zubka84 [21] · Answer 1 · 2022-01-02T03:09:16+03:00

Answer:

$4,720

Explanation:

<h2>Tricky, but EASY!</h2><h2 /><h3>The balance for <em><u>ALLOWANCE FOR DOUBTFUL ACCOUNTS</u></em> should be 2% of Credit Sales. </h3>

That is 2%(247,000)= 4,940.

<h3 />

However, there is already a balance of 220. So we must adjust it to be equal to 4,940 by adding the difference!

4,940 -220= 4,720

<h2>And the entry is</h2><h2 />

Bad debt expense 4,720

Allowance for Doubtful Accounts 4,720

<h3 />