Final answer:
To calculate the amount of bad debts expense using the percentage of receivables method, subtract the current balance in the Allowance for Doubtful Accounts from the desired ending balance. In this case, the adjustment needed is $17,000, so the bad debts expense for the period is $17,000.
Step-by-step explanation:
To determine the amount of bad debts expense using the percentage of receivables method, we need to calculate the desired ending balance in the Allowance for Doubtful Accounts. The formula to calculate the ending balance is: Desired Ending Balance = Accounts Receivable * Bad Debts Percentage. From the given information, the estimated uncollectible accounts are $25,000. Therefore, the desired ending balance in the Allowance for Doubtful Accounts is $25,000. Now, let's calculate the necessary adjustment to achieve this balance.
The current balance in the Allowance for Doubtful Accounts is $8,000 debit. To increase this balance to the desired ending balance of $25,000, we need an adjustment of $17,000. This adjustment represents the needed increase in the Allowance for Doubtful Accounts and is recorded as Bad Debts Expense. Therefore, the correct answer is option c) $17,000.