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AleksAgata [21]
3 years ago
13

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

counts receivable balance of $40,000; allowance for doubtful accounts balance of $300 (credit and sales of $500,000. Based on history. Ana estimates that bad debts will be 2 of accounts receivable. The entry to record estimated bad debts will include a debit to bad debts expense in the amount of:________.
A. $800
B. $1.100
C. $10.000
D. $9,700
E. $10900
F. $500
Business
1 answer:
Afina-wow [57]3 years ago
6 0

Answer:

A. $800

Explanation:

Ana Co.

Sales                            $500,000        

Accounts Receivable    $40,000      

Allowance for doubtful accounts   $300  Credit

Bad Debts Expense = 2 % of $ 40,000=   $  800          

The adjusting entry would be

Bad Debts Expense $ 800 Dr.

Allowance for doubtful accounts   $800  Credit    

As we already have a credit balance of $ 300 in the doubtful accounts we will increase it with an amount of $ 500.

Allowance for Doubtful Accounts $ 500 Debit

Account Receivable                     $ 500 Credit      

   

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