Haven Company Uses the Percentage of Sales Method for Recording $\begin{array}{lrr} \text {Bad Debt Expense } &\33,000\ \text {Allowance for Doubtful Accounts } &&33,000\\\end{array}$

question 65

Short Answer

Haven Company uses the percentage of sales method for recording bad debt expense. For the year, cash sales are $600,000 and credit sales are $2,700,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Haven Company make to record the bad debt expense? a.
$\begin{array}{lrr} \text {Bad Debt Expense } &\33,000\ \text {Allowance for Doubtful Accounts } &&33,000\\\end{array}$

b.
$\begin{array}{lrr} \text { Bad Debt Expense} &27,000\\ \text { Allowance for Doubtful Accounts } &&27,000\\\end{array}$

c.
$\begin{array}{lrr} \text { Bad Debt Expense } &27,000\\ \text { Accounts Receivable } &&27,000\\\end{array}$

d.
$\begin{array}{lrr} \text { Bad Debt Expense } &33,000\\ \text { Accounts Receivable } &&33,000\\\end{array}$

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Definitions:

Average Sale Period

The time it takes to convert your inventory into sales, usually expressed in days.

Average Sale Period

The average sale period is the average time taken to convert inventory into sales, often used to assess the efficiency of a business's inventory management.

Average Collection Period

The average time it takes for a company to receive payments owed by its customers, indicating the effectiveness of its credit and collection policies.

Year 2

Refers to the second year of a particular time frame, project, or financial period, often used in forecasting or comparing year-over-year performance.