Sheridan Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable...
Sheridan Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $150000 and credit sales are $1510000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Sheridan Company make if the Allowance for Doubtful Accounts has a credit balance of $1500 before adjustment?
|
a. Bad Debt Expense |
15100 |
||
|
Allowance for Doubtful Accounts |
15100 |
||
|
b. Bad Debt Expense |
4500 |
||
|
Accounts Receivable |
4500 |
||
|
c. Bad Debt Expense |
15100 |
||
|
Accounts Receivable |
15100 |
||
|
d. Bad Debt Expense |
4500 |
||
|
Allowance for Doubtful Accounts |
4500 |
||
Homework Answers
|
Account Titles |
Debit | Credit | |
|
Bad Debt Expense |
$4,500 |
||
|
Allowance for Doubtful Accounts |
$4,500 |
||
.
Under the percentage of receivables method,
Bad debt expense = (Accounts receivable balance x 4%) - Credit balance Allowance for Doubtful Accounts
= ($150,000 x 4%) - $1,500
= $6,000 - $1,500
= $4,500
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