Question

Carlton Company uses the percent of sales method to estimate its bad debt expense. Based on past experience, the company estimates 2 percent of credit sales to be uncollectible. At the end of the current year, the company's unadjusted trial balance shows Accounts Receivable of $245,000 and Credit Sales of $900,000.

Required:
Prepare the necessary December 31 adjusting entry.

Answer 1

Dr Bad debt expense 18,000

CrAllowance for doubtful accounts 18,000

Step-by-step explanation:

Preparation of the necessary December 31 adjusting entry.

Based on the information given if the the company estimated 2 percent of credit sales to be uncollectible in which the Credit Sales was the amount of $900,000 which means that the necessary December 31 adjusting entry will be :

Dr Bad debt expense 18,000

CrAllowance for doubtful accounts 18,000

(2%*$900,000)