Carlton Company uses the percent of sales method to estimate its bad debt expense. Based on past experience, the company estimates 2 percent of credit sales to be uncollectible. At the end of the current year, the company's unadjusted trial balance shows Accounts Receivable of $245,000 and Credit Sales of $900,000.

Required:

Prepare the necessary december 31 adjusting entry by selecting the account names from the drop down menus and entering the dollar amounts in the debit or credit columns.

Question

Business

Tess Branch

15 March, 15:08

Carlton Company uses the percent of sales method to estimate its bad debt expense. Based on past experience, the company estimates 2 percent of credit sales to be uncollectible. At the end of the current year, the company's unadjusted trial balance shows Accounts Receivable of $245,000 and Credit Sales of $900,000.

Required:

Prepare the necessary december 31 adjusting entry by selecting the account names from the drop down menus and entering the dollar amounts in the debit or credit columns.

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Answers (1)

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Ace Sherman · Answer 1

Debit Bad debt expense with 18,000; and Credit Allowance for doubtful accounts with 18,000

Explanation:

Bad debt expenses = $900,000 * 2% = $18,000

The adjusting journal entries will look a s follows

Details Dr ($) Cr ($)

Bad debt expense 18,000

Allowance for doubtful accounts 18,000

To record the uncollectible Accounts Receivable