Asked by Lauren Byrd-Moreno on Jul 08, 2024

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Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct regarding the entry to record estimated uncollectible receivables?

A) Cash will be debited.
B) Bad Debt Expense will be credited.
C) Allowance for Doubtful Accounts will be credited.
D) Accounts Receivable will be debited.

Uncollectible Expenses

Costs resulting from customers' failure to pay what they owe, also known as bad debts.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the amount of accounts receivable that may not be collectible.

Percent of Sales Method

A financial forecasting model that predicts future variables, such as expenses and inventory levels, as a percentage of projected sales.

  • Understand the methods and rationale for estimating uncollectible accounts.
  • Calculate the estimated uncollectible accounts using the percentage of sales and analysis of receivables methods.
  • Record journal entries for estimating, adjusting, and writing off uncollectible accounts receivable.
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CW
Clara WaldonJul 13, 2024
Final Answer :
C
Explanation :
The percent of sales method of estimating uncollectible expenses requires recording an adjusting entry to increase the Allowance for Doubtful Accounts. Therefore, the correct answer is C, Allowance for Doubtful Accounts will be credited. None of the other accounts listed are involved in this adjusting entry.