The Allowance for Uncollectible Accounts has a credit balance of $500. The sales for the current year were $800,000, and the historical bad debt percentage has been 2% of sales. The adjusting journal entry amount should be $15,500 under the percent-of-sales method.

Question

Quizplus · Accepted Answer

The adjusting journal entry should be $16,000 (2% of $800,000), not $15,500. The existing credit balance of $500 in the Allowance for Uncollectible Accounts is not considered in the percent-of-sales method.

The Allowance for Uncollectible Accounts Has a Credit Balance of $500