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 $ 435,000 Debit Allowance for Doubtful Accounts 1,250 Debit Net Sales 2,100,000 Credit All sales are made on credit. Based on past experience, the company estimates 1% 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?

Question

Fisher Sanford

Business

19 October, 00:07

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 $ 435,000 Debit Allowance for Doubtful Accounts 1,250 Debit Net Sales 2,100,000 Credit All sales are made on credit. Based on past experience, the company estimates 1% 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?

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Adrian · Answer 1

bad debt expense 21,000 debit

Allowance for Doubtful Accounts 21,000 credit

Explanation:

"uses the percent of sales method to determine its bad debts expense. "

This means 1% of sales is the ammount of bad debt expense we don't have to calculate a further adjustment.

2,100,000 x 1% = 21,000