Question

4. Harney Inc. uses the percentage of credit sales method of estimating doubtful accounts. The Allowance for Doubtful Accounts has an unadjusted credit balance of $5,700 and the company had $290,000 of net credit sales during the period. Harney has experienced bad debt losses of 6% of credit sales in prior periods. After making the adjusting entry for estimated bad debts, what is the ending balance in the Allowance for Doubtful Accounts account?

a. $11,700.
b. $17,400.
c. $11,400.
d. $23,100.

Answer 1

a. $11,700.

Step-by-step explanation:

The computation of the ending balance in the Allowance for Doubtful Accounts is shown below:

= Net credit sales × estimated percentage - unadjusted credit balance

= $290,000 × 6% - $5,700

= $17,400 - $5,700

= $11,700

We simply deducted the credit balance from the estimated value so that the accurate amount can come

All other information which is given is not relevant. Hence, ignored it