Question
A company had credit sales of $5.0 million for the year and estimates their bad debts to be 1% of net credit sales. The accountant
A company had credit sales of $5.0 million for the year and estimates their bad debts to be 1% of net credit sales. The accountant for the company is thinking about switching to the aging of accounts receivable method and after preparing the aging schedule, the estimate equals $48,000. Accounts receivable has a $450,000 balance and the allowance for doubtful accounts has a credit balance of $3,000 prior to adjustment.
The journal entry to record bad debts expense when the aging of accounts receivable method is used would be:
a. a debit to the bad debts expense account for $50,000 and a credit to accounts receivable for $50,000.
b. a debit to bad debts expense for $45,000 and a credit to the allowance for doubtful accounts for $45,000.
c. a debit to bad debts expense for $50,000 and a credit to the allowance for doubtful accounts for $50,000.
d. a debit to bad debts expense for $47,000 and a credit to accounts receivable for $47,000.
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