arianawelsh123l
06.05.2020 •
Business
A company uses the percent of receivables 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 $ 375,000 debit Allowance for uncollectible accounts 500 credit Net Sales 800,000 credit
All sales are made on credit. Based on past experience, the company estimates 0.6% of net 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? A) Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130. B) Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630. C) Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300. D) Debit Bad Debts Expense $4.800; credit Allowance for Doubtful Accounts $4,800. E) Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.
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Ответ:
C) Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300
Explanation:
accounts receivable $375,000
allowance for uncollectible accounts $500
net sales $800,000, all on credit
estimated bad debts = net credit sales x 0.6% = $800,000 x 0.6% = $4,800
since the balance of the allowance account is just $500, it must e adjusted to include the remaining estimated bad debt = $4,800 - $500 = $4,300
the journal entry should be:
December 31, adjustment of bad debt expense
Dr Bad debt expense 4,300
Cr Allowance for uncollectible accounts 4,300
Allowance for uncollectible accounts is a contra asset account that reduces the value of accounts receivable and has a credit balance.
Ответ:
by itself
Explanation: