Question

Carlton Company uses the percent of sales method to estimate its bad debt expense. Based on past experience, the company estimates 2 percent of credit sales to be uncollectible. At the end of the current year, the company's unadjusted trial balance shows Accounts Receivable of $245,000 and Credit Sales of $900,000.

Required:
Prepare the necessary december 31 adjusting entry by selecting the account names from the drop down menus and entering the dollar amounts in the debit or credit columns.

Answer 1

Debit Bad debt expense with 18,000 ; and Credit Allowance for doubtful accounts with 18,000

Step-by-step explanation:

Bad debt expenses = $900,000 × 2% = $18,000

The adjusting journal entries will look a s follows

Details Dr ($) Cr ($)

Bad debt expense 18,000

Allowance for doubtful accounts 18,000

To record the uncollectible Accounts Receivable