Splish Brothers Inc. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $320000 and credit sales are $3210000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Splish Brothers Inc. make if the Allowance for Doubtful Accounts has a credit balance of $3200 before adjustment?

a. Bad Debt Expense 9600 Allowance for Doubtful Accounts 9600

b. Bad Debt Expense 9600 Accounts Receivable 9600

c. Bad Debt Expense 32100 Accounts Receivable 32100

d. Bad Debt Expense 32100 Allowance for Doubtful Accounts 32100

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21 May, 10:22

Splish Brothers Inc. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $320000 and credit sales are $3210000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Splish Brothers Inc. make if the Allowance for Doubtful Accounts has a credit balance of $3200 before adjustment?

a. Bad Debt Expense 9600 Allowance for Doubtful Accounts 9600

b. Bad Debt Expense 9600 Accounts Receivable 9600

c. Bad Debt Expense 32100 Accounts Receivable 32100

d. Bad Debt Expense 32100 Allowance for Doubtful Accounts 32100

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Answers (1)

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Braylen · Answer 1

Answer:A. Bad debt account$9600, Allowance for doubtful account $9600

Explanation:

4% of the receivable of $320,000 gives $12800. This means the provision will be increased by $9600 to take care of the under provision at the beginning of the year.

The new year provision will show a balance of 12800 and sum of $9600 will be used to reduce the receivable.