Question

tanning company analyzes its receivables to estimate bad debt expense. the accounts receivable balance is $376,000 and credit sales are $1,000,000. an aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. what adjusting entry will tanning company make if the allowance for doubtful accounts has a credit balance of $1,400 before adjustment? a. bad debt expense 18,400 allowance for doubtful accounts 18,400 b. bad debt expense 16,400 allowance for doubtful accounts 16,400 c. bad debt expense 17,400 allowance for doubtful accounts 17,400 d. bad debt expense 16,900 allowance for doubtful accounts 16,900

Answer 1

The adjusting entry that Tanning Company will make if the allowance for doubtful accounts has a credit balance of $1,400 before adjustment is option b. bad debt expense $16,400 allowance for doubtful accounts $16,400.

Step-by-step explanation:

The adjusting entry that Tanning Company will make if the allowance for doubtful accounts has a credit balance of $1,400 before adjustment is option

b. bad debt expense $16,400 allowance for doubtful accounts $16,400.

This adjusting entry is necessary to account for the estimated uncollectible accounts receivable.

Based on the aging of accounts receivable, it is determined that approximately 5% of the outstanding receivables will be uncollectible.

The adjusting entry debits Bad Debt Expense for the estimated amount of $16,400 and credits Allowance for Doubtful Accounts for the same amount.