Question

A company uses the percent of receivables 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 $ 382,000 debit Allowance for uncollectible accounts 570 credit Net Sales 870,000 credit All sales are made on credit. Based on past experience, the company estimates that 5% of receivables are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared

Answer 1

$18,530

Step-by-step explanation:

The computation of the amount debited to the bad debt expense is shown below:

= Account receivable × estimated uncollectible percentage - credit balance of allowance for uncollectible accounts

= $382,000 × 5% - $570

= $19,100 - $570

= $18,530

We simply applied the above formula so that the amount debited to bad debt expense could come