Ask Question
17 March, 23:50

Haven Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $600,000 and credit sales are $2,200,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Haven Company make to record the bad debts expense? a. Bad Debts Expense 28,000

Allowance for Doubtful Accounts 28,000

b. Bad Debts Expense 28,000

Accounts Receivable 28,000

c. Bad Debts Expense 22,000

Allowance for Doubtful Accounts 22,000

d. Bad Debts Expense 22,000

Accounts Receivable 22,000

+2
Answers (1)
  1. 18 March, 00:31
    0
    c.

    Bad Debts Expense 22,000

    Allowance for Doubtful Accounts 22,000

    Explanation:

    Haven uses the percentage of sales method for recording bad debts expense. Under this method bad debts expense is calculated as percentage of credit sales of the period. Cash sales are ignored. Bad debts expense is calculated by the formula:

    Bad Debts Expense = Estimated % * Credit Sales

    = 1% x $2,200,000 = $22,000

    The company will make adjusting entry below:

    Debit Bad Debts Expense $22,000

    Credit Allowance for Doubtful Accounts $22,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Haven Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $600,000 and credit sales ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers