Nichols Company Uses the Percentage of Receivables Method for Recording

question 152

Short Answer

Nichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?

---

Definitions:

Analyzing Cases

This involves the examination of legal cases to understand their implications, including dissecting the arguments, judgments and rationales used by the courts.

Majority Opinion

The judicial opinion agreed to by more than half of the members of a court, setting out the decision of the court.

Dissenting Opinions

Written opinions by judges who disagree with the majority decision in a court case.

Concurring Opinions

Judicial opinions that agree with the overall conclusion of the majority in a court ruling but may differ on reasoning or legal principles.