Answered

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A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company’s unadjusted trial balance reported the following selected amounts: ACCOUNTS RECEIVABLE $355,000 DR ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS $500 CR NET SALES $800,000 CR All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be uncollectible. What is the dollar amount of Bad Debts Expense management is estimating prior to any adjustment for the amount in the allowance for doubtful accounts?

Sagot :

Tundexi

Answer:

Estimated bad debts expense = Net Credit sales * Credit sales estimated to be uncollectible

Estimated bad debts expense = $800,000 * 0.6%

Estimated bad debts expense = $4,800

                        Adjusting Journal Entry

General Journal                                             Debit     Credit

Bad Debts Expense                                     $4,800

    Allowance for uncollectible accounts                   $4,800

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