A company used the percent of sales 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:
All sales are made on credit.Based on past experience,the company estimates 1% of 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 $19,750; credit Allowance for Doubtful Accounts $19,750.
B)Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C)Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
D)Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E)Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

Question

A company used the percent of sales 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:
 All sales are made on credit.Based on past experience,the company estimates 1% of 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 $19,750; credit Allowance for Doubtful Accounts $19,750. 
B)Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225. 
C)Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250. 
D)Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350. 
E)Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

Quizplus · Accepted Answer

$2,100,000 * 0.01 = $21,000

A Company Used the Percent of Sales Method to Determine