Clarissa Company has credit sales of $400,000 during 2010 and estimates at the end of 2010 that

Question:

Clarissa Company has credit sales of $400,000 during 2010 and estimates at the end of 2010 that 2 percent of these credit sales will eventually default. Also, during 2010 a customer defaults on a $775 balance related to goods purchased in 2009. Prior to the write off for the $775 default, Clarissa's accounts receivable and allowance for doubtful accounts balances were $402,000 and $129 (credit), respectively.

Required:

Estimate the appropriate balance for bad debt expense and prepare the adjusting entry to record the bad debt expense for 2010.

Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...