Question
A companys controller estimated bad debt expense using the percentage of accounts receivable method. Total sales for the year were $1,500,000. The ending balance in
A companys controller estimated bad debt expense using the percentage of accounts receivable method. Total sales for the year were $1,500,000. The ending balance in accounts receivable was $300,000. An examination of the outstanding accounts at the end of the year indicates that approximately 7% of these accounts will ultimately prove to be uncollectible. Before any adjustment, the balance in the allowance for bad debts is $4,000 (credit). Total accounts written off as uncollectible during the year were $15,000.
Which debit or credit is included in the adjusting entry to record bad debt expense for the year?
1. Credit allowance for bad debts for $21000
2. Debit allowance for bad debts for $25000
3. Credit allowance for bad debts for $17000
4. Debit allowance for bad debts for $15000
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