Question

All sales are made on credit. Based on past experience, the company estimates that 0.5% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

Answer 1

$4,400

Step-by-step explanation:

The computation of the amount which is debited to a bad debt expense account is shown below:

= Net Credit sales × estimated percentage given

= $880,000 × 0.5%

= $4,400

The journal entry is shown below;

Bad debt expense A/c Dr $4,400

To Allowance for doubtful debts $4,400

(Being bad debt expense is recorded)