Allowance for Doubtful Accounts Has a Debit Balance of $500

question 63

Multiple Choice

Allowance for Doubtful Accounts has a debit balance of $500 at the end of the year (before adjustment) , and bad debt expense is estimated at 4% of net credit sales. If net credit sales are $600,000, the amount of the adjusting entry to record the estimate of the uncollectible accounts is

• A) $24,500
• B) $23,500
• C) $24,000
• D) cannot be determined

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Definitions:

Cost of Goods Sold

Cost of Goods Sold (COGS) represents the direct costs attributable to the production of the goods sold in a company.

Finished Goods Inventory

The inventory of goods that are completed and ready for sale.

Goods Available

The total inventory that a company has ready for sale at the beginning of an accounting period, including both produced and acquired goods.

Raw Materials

Basic materials used in the production process to create goods and services.