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9 February, 16:50

59) Average Art is a new business. During its first year of operations, credit sales were $40,000 and collections of credit sales were $36,000. One account, $650, was written off. Management uses the percent-of-sales method to account for bad debts expense and estimates 2% of credit sales to be uncollectible. Prepare the entry to record bad debts expense.

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  1. 9 February, 17:01
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    Bad debts expense and estimates 800

    Allowance for Doubtful Accts 800

    Allowance for Doubtful Accts 650

    Accounts receivable account 650

    Explanation:

    A=Credit sales 40000

    B=Percent-of-sales method to account for bad debts expense and estimates 2%

    Bad debts expense and estimates = AxB

    =40000x2%

    =800

    You must remember to register the writte off. $650.
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