Blossom Inc.has an unadjusted debit balance of $3,500 in its Allowance for Doubtful Accounts.The company has experienced bad debt losses of 2% of credit sales in prior periods.Blossom reported net credit sales of $1,500,000 for the current period.The required journal entry to record Bad Debt Expense should include a debit to:

Question

Quizplus · Accepted Answer

To calculate the amount of bad debt expense for the current period, we need to multiply the net credit sales ($1,500,000) by the historical bad debt loss rate (2%):
$1,500,000 x 0.02 = $30,000

Since the Allowance for Doubtful Accounts already has an unadjusted debit balance of $3,500, we only need to debit Bad Debt Expense for the remaining $30,000 to record the estimated bad debt expense for the current period. Therefore, the correct journal entry would be:
Bad Debt Expense             $30,000
Allowance for Doubtful Accts       $30,000