Haven Company Uses the Percentage of Receivables Method for Recording

question 142

Short Answer

Haven Company uses the percentage of receivables method for recording bad debt expense. The accounts receivable balance is $600,000 and credit sales are $2,700,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Haven Company make to record bad debt expense if the Allowance for Doubtful Accounts has a $5,000 credit balance before adjustment?

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Definitions:

Promotional Mix

The combination of marketing tools used by a business to execute its promotional strategy, including advertising, sales promotion, public relations, and direct marketing.

Personal Selling

A direct marketing approach involving face-to-face sales presentations to potential buyers to persuade them to make a purchase.

Nonpersonal Selling

Marketing activities that do not involve face-to-face interactions, including advertising, social media marketing, and email marketing.

Perceived Quality

The customer's perception of the overall quality or superiority of a product or service compared to alternatives.