Question

Allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), and uncollectible accounts expense is estimated at 2% of sales. If sales are $600,000, the amount of the adjusting entry to record the provision for doubtful accounts is:

Answer 1

$11,500

Step-by-step explanation:

Given

Sales = $600,000

And uncollectible accounts expense is estimated at 2% of sales

Therefore,

uncollectible accounts expense = 2% × $600,000

= $12,000

Since allowance for Doubtful Accounts has a credit balance of $500 at the end of the year (before adjustment), the account has to be adjusted by

= $12,000 - $500

= $11,500

The amount of the adjusting entry to record the provision for doubtful accounts is $11,500.