Question

Dorothy Company uses the percentage-of-receivables method for recording bad debt expense. The Accounts Receivable balance is $250,000 and credit sales are $1,000,000. Management estimates that 6% of accounts receivable will be uncollectible. What adjusting entry will Dorothy Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? 10,000 Bad Debt Expense 10,000 Accounts Receivable 5,000 Bad Debt Expense 5,000 Allowance for Doubtful Accounts 12,500 Bad Debt Expense 12,500 Allowance for Doubtful Accounts 17,500 Bad Debt Expense 17,500 Allowance for Doubtful Accounts

Answer 1

Answer is option c) bad debt expense 12,500 Allowance for Doubtful Account 12500 Account Receivable $250,000 Bad debt @6 % $ 15,000 less: Balance already in doubtful account - $ (2,500) 12,500 So, additional allowance for Bad debt to be made journal entry Particulars Bad debt expense debit Credit $12,500 12,500 Allowance for Doubtful Account