Question

All sales are made on credit. Based on past experience, the company estimates 0.5% of net sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense

Answer 1

Debit Bad debts expense $11,000

Credit Allowance for doubtful accounts $11,000

Step-by-step explanation:

Incomplete question: A company uses the percent of receivables 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: $445,000 Debit

Allowance for Doubtful Accounts: 1,350 Debit

Net Sales: 2,200,000 Credit

Estimated bad debts = $2,200,000*0.5%

Estimated bad debts = $11,000

Account titles & Explanations Debit Credit

Bad debts expense $11,000

Allowance for Doubtful accounts $11,000