Question

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.

Answer 1

Answer:

(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