Question

A company’s Accounts Receivable balance at its December 31 year-end is $125,650, and its Allowance for Doubtful Accounts has a credit balance of $328 before year-end adjustment. Its net sales are $572,300. It estimates that 4% of outstanding accounts receivable are uncollectible. What amount of bad debts expense is recorded at December 31?(A) $5,353(B) $328(C) $5,026(D) $4,698(E) $34,338

Answer 1

(D) $4,698

Step-by-step explanation:

The journal entry to record the bad debt expense is shown below:

Bad debt expense A/c Dr $4,698

To Allowance for doubtful debts $4,698

(Being bad debt expense is recorded)

The computation of the bad debt expense is shown below:

= (Accounts receivable × estimated percentage given ) - (credit balance of Allowance for Doubtful Accounts)

= ($125,650 × 4%) - ($328)

= $5,026 - $328

= $4,698