Question

All sales are made on credit. Based on past experience, the company estimates 0.3% of net credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense

Answer 1

Missing word "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 $350,000 debit, Allowance for uncollectible accounts 650 debit, Net Sales 795,000 credit"

Net credit sales = $795,000

Bad debt expense = 0.3% * Net credit sales

Bad debt expense = $795,000 * 0.3%

Bad debt expense = $2,385

Adjusting entry

Date General Journal Debit Credit

Bad debt expense $2,385

Allowance for uncollectible accounts $2,385

(To record bad debt expense)