Answer:
The adjusting journal entry to record bad debt expense for the year:
Debit Bad debts expense $17,500
Credit Allowance for doubtful accounts $17,500
Explanation:
Sunland Company uses the percentage-of-receivables basis to record bad debt expense and the company estimates that 2% of accounts receivable will become uncollectible.
Estimated uncollectible = 2% x $630,000 = $12,600
Before adjusting, Allowance for doubtful accounts has balance of $4,900 (debit).
Bad debts expense = $12,600 + $4,900 = $17,500
The adjusting journal entry:
Debit Bad debts expense $17,500
Credit Allowance for doubtful accounts $17,500
