Wildhorse Co. uses the percentage of receivables method for recording bad debts

Question

Wildhorse Co. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $260000 and credit sales are $2610000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Wildhorse Co. make if the Allowance for Doubtful Accounts has a credit balance of $2600 before adjustment?

A.Bad Debt Expense 7800

Accounts Receivable 7800

B.Bad Debt Expense 7800

Allowance for Doubtful Accounts 7800

C.Bad Debt Expense 26100

Allowance for Doubtful Accounts 26100

D.Bad Debt Expense 26100

Accounts Receivable 26100

Explanation / Answer

B.Bad Debt Expense 7800 Allowance for Doubtful Accounts 7800 Statement showing computations Particulars Amount Cr Balance in Allowance for doubtful accounts          2,600.00 Closing Account receivable      260,000.00 Estimated A/R Uncollectible 4% Required allowance = 260,000 * 4%        10,400.00 Existing Allowance          2,600.00 Further allowance to be created = 10,400 - 2,600          7,800.00 Entry Required would be Particulars Dr Amt CrAmt Bad Debts Expense Dr          7,800.00 To Allowance for doubtful accounts             7,800.00

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.