You are preparing financial statements and need to make the adjustment to bad debts. You have...
You are preparing financial statements and need to make the adjustment to bad debts. You have sales of $100,000 and sales returns of $20,000. You calculate bad debts to be 1% of gross sales. What is the adjustment needed in the allowance if before the adjustment you have a debit balance in the allowance of $200?
Select one:
a. $1,000
b. $800
c. $1,200
d. 0
Homework Answers
Answer
--Adjustment required = 1% of Gross sales = 1% of $ 100000 = $ 1000
--Correct Answer = Option 'a' $ 1,000.
--Debit balance of Allowance account would not make a difference as bad debt are to be calculated on the basis of % of sales.
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