Question 12

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Valli Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $700,000 and credit sales are $2,500,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Valli Company make to record the bad debts expense?

Select one:

a. Bad Debt Expense ................................................................ 25,000
Accounts Receivable ............................................. 25,000

b. Bad Debt Expense ................................................................ 32,000
Accounts Receivable ............................................. 32,000

c. Bad Debt Expense ................................................................ 25,000
Allowance for Doubtful Accounts ........................... 25,000

d. Bad Debt Expense ................................................................ 32,000
Allowance for Doubtful Accounts ........................... 32,000

e. The answer does not exist