Question

MC Qu. 140 The following selected amounts...

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense.

Accounts receivable	$	435,000	Debit
Allowance for Doubtful Accounts		1,250	Debit
Net Sales		2,100,000	Credit

All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Multiple Choice

• Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.

• Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.

• Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

• Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.

• Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.

Answer 1

Answer : Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250 Working Notes: Account Titles and Explanation Debit Credit Bad Debt Expenses Allowence for doubtful accounts Being bad debt Expenses recorded) S 22,250 22,250 Estimated uncollectable accounts = $2,100,000*1% = $21,000 Bad Debt Expense = $21,000+$1,250 = $22,250 %3D