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Apply the allowance method: Mouse Ears Inc. has been in business for five years. At the end of each reporting period management uses the allowance
Apply the allowance method: Mouse Ears Inc. has been in business for five years. At the end of each reporting period management uses the allowance method for estimating and recognizing bad debt. You have been hired to prepare the journal entry to recognize bad debt using management's estimate for this reporting period. Mouse Ears Inc.'s management provides you with the following information: Sales of $5,250,000, accounts receivable of $820,000 and a balance in the allowance for doubtful accounts of $200,000 (before management's new estimate is calculated for this reporting period). After management aged the receivables, they concluded that 25% of the $820,000 accounts receivable would not be collectible. Using the allowance method What would the correct journal entry be to record / torecognize bad debt expense based on management's new estimate? O Dr. Bad Debts Expense $5,000 Cr. Allowance for Doubtful Accounts $5,000 O Dr. Bad Debts Expense $205,000 Cr. Allowances for Doubtful Accounts $205,000 O No entry is required to be recorded based on the data set provided
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