Question

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $ 378,000 debit Allowance for uncollectible accounts 530 credit Net Sales 830,000 credit All sales are made on credit. Based on past experience, the company estimates that 0.6% 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

$1,738

Step-by-step explanation:

Calculation to determine What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared

Using this formula

Bad Debts Expense=[(Accounts receivable*Estimated uncollectible net credit sales)-Allowance for uncollectible accounts]

Let plug in the formula

Bad Debts Expense=[($378,000*0.6%)-$530]

Bad Debts Expense=$2,268-$530

Bad Debts Expense=$1,738

Therefore the amount that should be debited to Bad Debts Expense when the year-end adjusting entry is prepared is $1,738