194k views
0 votes
Allowance for Doubtful Accounts has a debit balance of $800 at the end of the year (before adjustment), and bad debt expense is estimated at 3% of credit sales. If credit sales are $556,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts

User Sunil KV
by
8.4k points

1 Answer

2 votes

Answer:

$15,880

Step-by-step explanation:

The Bad Debt Expense = $16,680 ($556,000 x 3%)

This will be credited to the Allowance for Doubtful Accounts and debited to the Bad Debt Expense account. When balancing the Allowance for Doubtful Accounts (the Uncollectible Accounts), the $800 debit balance will be netted off to arrive at $15,880 as the balance.

Allowance for Doubtful Accounts is a contra asset (Accounts Receivable) account. It is a way for prudently providing for credit losses. The Bad Debt Expense account is the account where the expense for uncollectibles for the period is charged.

User Iamruskie
by
8.6k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.

9.4m questions

12.2m answers

Categories