Question

Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before adjustment), and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $600,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is A. $24,500B. $23,500C. $24,000D. cannot be determined

Answer 1

C. $24,000

Step-by-step explanation:

We assume that the company follows the percentage-of-sales method. In this method, the company ignored the previous balance of allowance for Doubtful Accounts

So, the amount of the adjusting entry to record the estimate of the uncollectible accounts would be

= Net credit sales × estimated percentage given

= $600,000 × 4%

= $24,000

All other information which is given is not relevant. Hence, ignored it