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

question 76

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

---

Definitions:

Antidepressant

Antidepressants are a class of drugs that are used to treat depressive disorders by altering chemicals in the brain that may become unbalanced.

Cold Sweats

A state of sweating without the presence of heat, often accompanying anxiety, fear, or medical conditions.

Selective Serotonin Reuptake Inhibitor

A class of drugs that are typically used as antidepressants in the treatment of depression, anxiety disorders, and some personality disorders.

Suicidal Thoughts

Thoughts about or an unusual preoccupation with suicide, which can range from a detailed plan to a fleeting consideration, indicating a potential risk for suicide.