Gideon Company uses the direct write-off method of accounting for uncollectible

Question

Gideon Company uses the direct write-off method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:

A )Allowance for Doubtful Accounts2,000 Accounts Receivable—A. Hopkins 2,000

b)Accounts Receivable—A. Hopkins2,000 Bad Debts Expense 2,000

c)Cash2,000 Accounts Receivable—A. Hopkins 2,000

d)

Accounts Receivable—A. Hopkins2,000 Cash 2,000

e)Bad Debts Expense2,000 Accounts Receivable—A. Hopkins 2,000

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:

All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Accounts receivable $ 375,000 debit Allowance for uncollectible accounts 500 credit Net Sales 800,000 credit

Explanation / Answer

1 Bad Debts Expense 2 ,000        Accounts Receivable—A. Hopkins 2,000 Option E is correct 2 Bad Debts Expense = 800000*0.6%= 4800

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