Question

Using the income statement method 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: Credit to Accounts Receivable for $2,000.
b. Debit to Bad Debt Expense for $10,000.
c. Debit to Allowance for Uncollectible Accounts for $10,000.
d. Credit to Bad Debt Expense for $8,000.

Answer 1

the adjustment for estimated uncollectible accounts will require

b. Debit to Bad Debt Expense for $10,000.

Step-by-step explanation:

There are two primary methods for estimating bad-debt expense. The first is an income-statement approach that measures bad debt as a percentage of sales.

Accout receivable at the end_ 80000

Credit sales_______________400000

Estimate________________ 2,50%

Debit bas debt expense______10000