Question

On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $98,800; Allowance for Doubtful Accounts, credit balance of $1,121. What amount should be debited to Bad Debts Expense, assuming 5% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

Multiple Choice

• $6,061.

• $3,819.

• $1,121.

• $2,927.

• $4,940.

Answer 1

Ans.	Option    2nd   $3,819
	*Calculations & Explanations:
	Estimated balance of allowance for doubtful debts account = Accounts receivables * 5%
	$98,800 * 5%
	$4,940
	Estimated balance of allowance for doubtful debts account	$4,940
	Less: Un adjusted credit balance in allowance account	-$1,121
	Bad debts expenses	$3,819
	*The un adjusted credit balance is deducted from the estimated balance of allowance accounts.
	*The un adjusted debit balance is added to the estimated balance of allowance accounts.