The Following Selected Amounts Are Reported on the Year-End Unadjusted

question 67

Multiple Choice

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. $$\begin{array} { | l | r | l | } \hline \text { Accounts receivable } & \$ 435,000 & \text { Debit } \\\hline \text { Allowance for Doubtful Accounts } & 1,250 & \text { Debit } \\\hline \text { Net Sales } & 2,100,000 & \text { Credit } \\\hline\end{array}$$ All sales are made on credit. Based on past experience, the company estimates 1% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

• A)Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
• B)Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
• C)Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
• D)Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
• E)Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.

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Definitions:

U.S. Border

The geographical boundary separating the United States from neighboring countries.

Duty-Free

Goods that are exempt from payment of certain local or national taxes and duties, typically sold at airports and international borders.

40-Ounce Bottle

A specific size of bottle that contains 40 ounces of liquid, commonly used for beverages.

Currency Exchange Rates

The value of one currency for the purpose of conversion to another, indicating how much one currency is worth in terms of another.