On December 31, before adjusting entries, Accounts Receivable had a debit balanc

Question

On December 31, before adjusting entries, Accounts Receivable had a debit balance of $100,000, and the Allowance for Doubtful Accounts had a credit balance of $3,000. Credit sales for the year were $800,000. If credit losses are estimated at 1% of credit sales:

Select one:

A. The balance of the Allowance for Doubtful Accounts will be $5,000 after adjustment

B. The balance of the Allowance for Doubtful Accounts will be $11,000 after adjustment

C. The balance of the Allowance for Doubtful Accounts will be $8,000 after adjustment

D. Bad Debts Expense for the year will be $11,000

E. None of the above

Explanation / Answer

Answer

= $ 800,000 x 1% = $ 8,000

Bad Debt expense account debited by $ 8,000,
Allowance fir Doubtful account credited by $ 8,000

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