Question

Colley Company uses the allowance method for bad debts and has the following information before the year end adjusting entry: Accounts Receivable $120,000 Allowance for Doubtful Accounts $500 Sales $800,000 18. If the company used the percentage of sale method and estimates bad debts to be 2% of sales what is the amount of bad debt expense: A) 2,400 B) 16,000 C) 16,500 D) 15,500 19. If the company uses the percentage of accounts receivable method and estimates 4% of accounts receivable will be uncollectible, what is the bad debt expense? A) 4,300 B) 4,800 C) 32,000 D) 5,300

Answer 1

Answer:

If the company used the percentage of sale method and estimates bad debts to be 2% of sales what is the amount of bad debt expense:

• D) 15,500

If the company uses the percentage of accounts receivable method and estimates 4% of accounts receivable will be uncollectible

• A) 4,300

Explanation:

• The percentage of sale method  

                  800,000  2%  16,000  

Initial Balance  

Accounts Receivable $ 120,000  

Allowance for Uncollectible Accounts  $ 500

Allowance for Uncollectible Accounts $ 15,500  

Accounts Receivable  $ 15,500

• Accounts Receivable Method  4%  4,800  

Bad debt expense $ 4,300  

Allowance for Uncollectible Accounts  $ 4,300