Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? $\begin{array}{lll}
\text { a. Bad Debt Expense } & 8,000 & \
\text { Allowance for Doubtful Accounts } & & 8,000 \
\text { b. Bad Debt Expense } &6,000 \
\text { Allowance for Doubtful Accounts } && 6,000 \
\text { c. Bad Debt Expense } & 6,000 & \
\text { Accounts Receivable } & & 6,000 \
\text { d. Bad Debt Expense } & 8,000 & \
\text { Accounts Receivable } & & 8,000
\end{array}$

Question

Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? $\begin{array}{lll}
\text { a. Bad Debt Expense } & 8,000 & \
\text { Allowance for Doubtful Accounts } & & 8,000 \
\text { b. Bad Debt Expense } &6,000 \
\text { Allowance for Doubtful Accounts } && 6,000 \
\text { c. Bad Debt Expense } &  6,000 &  \
\text { Accounts Receivable } & & 6,000 \
\text { d. Bad Debt Expense } & 8,000  & \
\text { Accounts Receivable } & & 8,000 
\end{array}$

Quizplus · Accepted Answer

The Answer of Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment? $\begin{array}{lll}
\text { a. Bad Debt Expense } & 8,000 & \
\text { Allowance for Doubtful Accounts } & & 8,000 \
\text { b. Bad Debt Expense } &6,000 \
\text { Allowance for Doubtful Accounts } && 6,000 \
\text { c. Bad Debt Expense } &  6,000 &  \
\text { Accounts Receivable } & & 6,000 \
\text { d. Bad Debt Expense } & 8,000  & \
\text { Accounts Receivable } & & 8,000 
\end{array}$

Nichols Company Uses the Percentage of Receivables Method for Recording