Marx Company estimates bad debt expense using a percentage of credit sales (4%).The company began its current year with an $8, 500 balance in the allowance account.During the current year, $10, 500 of accounts receivable were written off, and $1, 200 of previously written off accounts were collected.Credit sales for the year were $200, 000.The bad debt expense for the year was

Question

Quizplus · Accepted Answer

To calculate bad debt expense for the year, we need to calculate the ending balance in the allowance account. 
Beginning balance in allowance account = $8,500 
Accounts written off during the year = $10,500 
Previously written off accounts collected = ($1,200) 
Ending balance in allowance account = $17,800 
Credit sales for the year = $200,000 
4% of credit sales = $8,000 
To adjust the allowance account to the ending balance, we need to make a journal entry: 
Bad debt expense $8,000 
Allowance for doubtful accounts $8,000 
Therefore, the bad debt expense for the year is $8,000.

Marx Company Estimates Bad Debt Expense Using a Percentage of Credit