Question

Assume that you have a company. And the management estimates that 2.5% of sales will be uncollectible.

Provide an amount of sales and prepare the journal entry using the percent of sales method?

Answer 1

Let Credit sales = $100,000

2.5% of sales will be uncollectible

Bad Debt expense = Credit sales * estimated%

Bad Debt expense = $100,000 * 2.50%

Bad Debt expense = $2,500

Journal Entry will be

Bad Debt expense account..............Debit $2,500

To allowance for Doubtful account....credit $2,500