Asked by Griffin Appleman on Jun 15, 2024
Verified
On December 31 of the current year,the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable,debit balance of $95,250; Allowance for Doubtful Accounts,credit balance of $921.What amount should be debited to Bad Debts Expense,assuming 6% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?
A) $5,715.
B) $6,636.
C) $4,794.
D) $5,770.
E) $5,660.
Percent of Receivables Method
An accounting method used to estimate the amount of a company's receivables that will not be collected.
Bad Debts Expense
The portion of accounts receivable that a company does not expect to collect, recognized as an expense in financial accounting.
Allowance for Doubtful Accounts
An estimation of the amount of accounts receivable that may not be collected, which is used to reduce the total accounts receivable balance.
- Utilize the percent of sales technique for estimating bad debts expenditure.
Verified Answer
GB
Glenn BrownJun 18, 2024
Final Answer :
C
Explanation :
First, calculate 6% of the outstanding accounts receivable: $95,250 * 6% = $5,715. Then, adjust this amount by the existing credit balance in the Allowance for Doubtful Accounts: $5,715 - $921 = $4,794. This is the amount that should be debited to Bad Debts Expense.
Learning Objectives
- Utilize the percent of sales technique for estimating bad debts expenditure.