Ramsey Compnay estimates that 1% of net credit sales will become uncollectible.

Question

Ramsey Compnay estimates that 1% of net credit sales will become uncollectible. Sales are 400,000$, sales returns and allownces are 10,000$ and the allownce for the doubtful accounts has a 5,000$ credit balance before adjustment. What is the amount of bad debt expense for the period? What will the balance be in the allownces for doubtful accounts be after the adjusting journal entry is made?

Ramsey Compnay estimates that 3% of the accounts recievable will become uncollectible. Accounts recievable are 200,000$ at the end of the year, and the allowence for doubtful accounts has a $500 debt balance before adjustment. What is the amount of bad debt expense for this period? What will be the balance in the allownces for doubtful accounts be after the adjusting journal entry is made?

Explanation / Answer

1 Bad debt expense =(400000-10000)*1%= 3900 Allownces for doubtful accounts balance = 5000+3900 = 8900 2 Bad debt expense =(200000*3%)+500= 6500 Allownces for doubtful accounts balance = 6500-500 = 6000

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