Using the income statement approach for accounting for uncollectible accounts,a company estimates that 2.5% of credit sales will eventually become uncollectible.If credit sales during the year are $400,000 and accounts receivable at the end of the year are $80,000,the adjustment for estimated uncollectible accounts will require a:

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The adjustment for estimated uncollectible accounts using the income statement approach is based on a percentage of credit sales, not on the ending accounts receivable balance. Therefore, 2.5% of $400,000 in credit sales equals $10,000, which requires a debit to Bad Debt Expense to recognize the expense associated with the estimated uncollectible accounts.

Using the Income Statement Approach for Accounting for Uncollectible Accounts,a