A company used the percent of sales method to determine its bad debts expense. A

Question

A company used the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $ 441,000 Debit Allowance for Doubtful Accounts 1,310 Debit Net Sales 2,160,000 Credit All sales are made on credit. Based on past experience, the company estimates 1.0% its outstanding receivables are uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Explanation / Answer

New balance in allowance for doubtful accounts = $441000 x 1% =$4410 Thus, additional bad debt expenses = 4410 - 1310 = $3100 Dr Bad debts expenses $3100 Cr Allowance for doubtful accounts $3100 Hope this helps!

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