Bad Debt Expense info:Allowance for Doubtful Accounts has a credit balance of $1,000. Credit sales are $500,000. Cash sales are $500,000. Percentage of Sales Method is based on 5% of net credit sales. Aging Schedule shows that $25,000 is uncollectible. Accounts Receivable $200,000. Journalize adjusting entry--Using Percentage of Sales Methood.

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Business

Lane Wallace

10 July, 20:58

Bad Debt Expense info:Allowance for Doubtful Accounts has a credit balance of $1,000. Credit sales are $500,000. Cash sales are $500,000. Percentage of Sales Method is based on 5% of net credit sales. Aging Schedule shows that $25,000 is uncollectible. Accounts Receivable $200,000. Journalize adjusting entry--Using Percentage of Sales Methood.

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Marsh · Answer 1

(DR) Bad Debt Expense $25,000;

(CR) Allowance for Doubtful Accounts $25,000

Explanation:

In percentage of sales method, the balance in the allowance for doubtful debts is ignored.

Just simply multiply the Credit Sales amount of $500,000 by the Sales Method rate of 5% and you'll get $25,000 with this adjusting entry:

(DR) Bad Debt Expense $25,000

(CR) Allowance for Doubtful Accounts $25,000