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A company uses the percent of sales 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 $ 364,000 debit Allowance for uncollectible accounts 590 debit Net Sales 809,000 credit All sales are made on credit. Based on past experience, the company estimates that 0.5% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared

Respuesta :

Answer:

$4,635

Explanation:

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

= Net credit sales × estimated percentage + debit allowance for uncollectible accounts      

= $809,000 × 0.5% + $590

= $4,045 + $590

= $4,635

And, the journal entry is

Bad debt expense $4,635

     To Allowance for uncollectible accounts $4,635

(being the bad debt expense is recorded)