A company's Accounts Receivable balance at its December 31 year-end is $125,650, and its Allowance for Doubtful Accounts has a credit balance of $328 before year-end adjustment. Its net sales are $572,300. It estimates that 4% of outstanding accounts receivable are uncollectible. What amount of bad debts expense is recorded at December 31? (A) $5,353 (B) $328 (C) $5,026 (D) $4,698 (E) $34,338

Question

Damion Austin

Business

13 April, 10:11

A company's Accounts Receivable balance at its December 31 year-end is $125,650, and its Allowance for Doubtful Accounts has a credit balance of $328 before year-end adjustment. Its net sales are $572,300. It estimates that 4% of outstanding accounts receivable are uncollectible. What amount of bad debts expense is recorded at December 31? (A) $5,353 (B) $328 (C) $5,026 (D) $4,698 (E) $34,338

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Answers (1)

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Edwin Tyler · Answer 1

(D) $4,698

Explanation:

The journal entry to record the bad debt expense is shown below:

Bad debt expense A/c Dr $4,698

To Allowance for doubtful debts $4,698

(Being bad debt expense is recorded)

The computation of the bad debt expense is shown below:

= (Accounts receivable * estimated percentage given) - (credit balance of Allowance for Doubtful Accounts)

= ($125,650 * 4%) - ($328)

= $5,026 - $328

= $4,698