lp St Management estimates that 1% of the $100,000 of credit sales will be uncol

Question

lp St Management estimates that 1% of the $100,000 of credit sales will be uncollectible. The Allowance for Doubtful Accounts has a $100 unadjusted credit balance. The adjusting entry to record estimated bad debts includes a (Select all that apply.) Check all that apply. debit to Bad Debt Expense of $1,100 debit to Bad Debt Expense of $900o credit to Allowance for Doubtful Accounts of $1,000 debit to Bad Debt Expense of $1,000 credit to Allowance for Doubtful Accounts of $1,100 credit to Allowance for Doubtful Accounts of $900 Read about this Do you know the answer?

Explanation / Answer

Answer - Since there is already a credit balance of $100 in Allowance for Doubtful Accounts, as per the percentage of credit sales method, the bad debts are estimated to be a certain percentage of the credit sales as per the previous periods. Hence, only the difference amount is kept on adjusting in the Allowance for Doubtful Accounts.

The journal entry here would be -

DR. BAD DEBT EXPENSE 900 -

CR. ALLOWANCE FOR DOUBTFUL ACCOUNTS - 900

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