question mode multiple choice question flash co. uses the allowance method to account for bad debts. at the end of 2010, flash co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. based on history, flash estimates that bad debts will be 0.5% of sales. the entry to record estimated bad debts will include an debit to bad debts expense in the amount of: multiple choice question. $7,100 $795,000 $750,000 $7,500 $7,900

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27-10-2022
Business

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question mode multiple choice question flash co. uses the allowance method to account for bad debts. at the end of 2010, flash co.'s unadjusted trial balance shows an accounts receivable balance of $45,000; allowance for doubtful accounts balance of $400 (debit); and sales of $1,500,000. based on history, flash estimates that bad debts will be 0.5% of sales. the entry to record estimated bad debts will include an debit to bad debts expense in the amount of: multiple choice question. $7,100 $795,000 $750,000 $7,500 $7,900

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qwbrown qwbrown · Answer 1 · 2022-11-02T01:49:14-04:00

The bad debt expense is $7,500

A bad debt charge is incurred when a receivable is no longer recoverable because a client is unable to fulfill their obligation to pay an existing debt because of bankruptcy or other financial issues.

Account receivable balance = $45,000

Allowance for questionable account balance = $400 debit

Sales = $1,500,000

The estimated percentage is 0.5% of total sales.

As a result, the estimated bad debt expense is

= Estimated percentage of sales revenue

= $1,500,000 × 0.5%

= $7,500

The bad debt expense is $7,500

The following is the journal entry:

A/c Dr $7,500 in bad debt expense

Allowance for dubious debts $7,500

(Because bad debt expense is recorded) When the allowance method is used, the prior balance in the Allowance for Doubtful Accounts account is ignored.

To learn more about bad debt expense, please refer:

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