Question

Allowance for Doubtful Accounts has a debit balance of $900 at the end of the year (before adjustment), and bad debt expense is estimated at 1% of credit sales. If credit sales are $950,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts

a. is $10,400
b. is $9,500
c. is $900
d. is $8,600

Answer 1

a. is $10,400

Step-by-step explanation:

The adjusting entry is as follows:

bad debt expense Dr ($950,000 × 1% + $900) $10,400

To Allowance for doubtful debts $10,400

(Being bad debt expense is recorded)

here the bad debt expense is debited as it increased the assets and credited the allowance for doubtful debt is credited as it decreased the assets

Therefore the correct option is a.