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

Question

A company uses 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 $ 359,000 debit Allowance for uncollectible accounts 540 credit Net sales 804,000 credit All sales are made on credit. Based on past experience, the company estimates 0.6% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Explanation / Answer

0.006*804,000 = 4824 adjusting entry: Debit: Bad debt expense 4824 Credit: Allowance for doubtful accounts 4824

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