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

question 78

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.