Question

Assume that Simple Co. had credit sales of $255,000 and cost of goods sold of $155,000 for the period. Simple uses the aging method and estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $3,500. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $300. What amount of Bad Debt Expense would the company record as an end-of-period adjustment?

Answer 1

$3,200

Step-by-step explanation:

According to the scenario, computation for the given data are as follows:

Ending balance in Allowance for doubtful Accounts = $3,500

Credit balance in Allowance for doubtful Accounts = $300

So, Bad debt expense = Ending balance - Credit balance

= $3,500 - $300

= $3,200

So, the Journal entry are as follows:

Bad debt Expense A/c Dr. $3,200

To Allowance for doubtful A/c $3,200

( Being bad debt expense is recorded)