Question

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. Accounts receivable $ 445,000 Debit Allowance for Doubtful Accounts 1,350 Debit Net Sales 2,200,000 Credit All sales are made on credit. Based on past experience, the company estimates 2.0% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Answer 1

Answer:

Debit Bad Debts Expense $44,000; Credit Allowance for Doubtful Accounts $44,000.

Explanation:

Bad debt Expenses = Sales * Uncollectible rate

= $2,200,000*2.0%

= $44,000

Date   Account Titles and Explanation           Debit       Credit

            Bad debt expenses                             $44,000

                 Allowances for doubtful accounts                   $44,000

             (To record bad debt expenses)