Question

Wrangler Inc. uses the percentage of credit sales method to estimate Bad Debt Expense. At the end of the year, the company’s unadjusted trial balance includes the following: Accounts Receivable $ 349,000 Allowance for Doubtful Accounts (credit balance) 200 Net Credit Sales 900,000 Wrangler has experienced bad debt losses of 0.5% of credit sales in prior periods. What is the Bad Debt Expense to be recorded for the year?

Answer 1

Bad Debts Expense $ 4500 Dr

Step-by-step explanation:

Wrangler Inc.

Bad Debt Expense = 0.5 %of Credit Sales

Bad Debt Expense = 0.5 % of 900,000= $ 4500

The percent of credit sales method estimates bad debts expense at a prior percentage of bad debts with the current credit sales.

Since the Allowance method is used the bad debts expense will be 0.5 % of net sales which is $ 4500

Allowance for Doubtful Accounts (credit balance) 200

Bad Debts Expense $ 4500 Dr

Adjusted Balance of Allowance for Doubtful Accounts (credit balance) 4300