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 |
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
Sheridan Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable...
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