Question

Kirov, Inc. reports credit sales of $200,000 for the year ending December 31, 2015. The year- end unadjusted balance of its Allowance for Doubtful Accounts is a debit of $9,000 Experience suggests 6 percent of its net sales will be uncollectible. The amount that should be debited to Bad Debt Expense and credited to Allowance for Doubtful Accounts in its year- end adjusting entry is

A. $3,000
B. $21,000
C. $9,000
D. $12,000
E. $23,000

Answer 1

D. $12,000

Step-by-step explanation:

Allowance for Doubtful accounts = Credit sales * Rate

Allowance for Doubtful accounts = $200,000 * 6%

Allowance for Doubtful accounts = $12,000

Allowance for doubtful account

Particulars Particulars

Balance brought forward $9,000 Bad debts $12,000

Balance carried forward $3,000

Total $12,000 Total $12,000

Therefore, the amount to be debited to Bad debts and credited to Allowance for Doubtful accounts is $12,000.