Darby uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $104,500, allowance for doubtful accounts of $665 (credit) and sales of $925,000. If uncollectible accounts are estimated to be 4% of accounts receivable, what is the amount of the bad debts expense adjusting entry?
A) $4,845
B) $4,180
C) $3,515
D) $3,700
E) $3,850

Question

Quizplus · Accepted Answer

The estimated uncollectible accounts are 4% of $104,500, which is $4,180. The current allowance is $665, so the adjusting entry needed is $4,180 - $665 = $3,515.

Darby Uses the Allowance Method to Account for Uncollectible Accounts