Question

Finish Co. uses the allowance method to account for bad debts. At the end of 2010, Finish Co.'s unadjusted trial balance shows an accounts receivable balance of $30,000; allowance for doubtful accounts balance of $200 (credit); and sales of $600,000. Based on history, Finish estimates that bad debts will be 1% of sales. The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of: ___________

Answer 1

The entry to record estimated bad debts will include a debit to Bad Debts Expense in the amount of $6,000

Step-by-step explanation:

The computation of the bad debt expense is shown below:

= Credit sales × bad debt percentage

= $600,000 × 1%

= $6,000

The journal entry is also shown below for better understanding

Bad debt expense A/c Dr $6,000

To Allowance for Doubtful Debts $6,000

(Being estimated bad debts expense recorded)

All other items which are given is not relevant. So, it is not taken in the computation part Hence, ignored it.