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multiple choice question flash co. uses the allowance method to account for bad debts. at the end of the year, 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. $795,000 $7,900 $7,500 $750,000 $7,100



Answer :

The entry to record estimated bad debts will include an debit to bad debts expense in the amount of $7,500.

Given,

Accounts receivable balance - $45,000

Doubtful accounts balance - $400

Sales of - $1,500,000

Bad debts will be - 0.5% of sales

So, the estimated bad debt expense is-

= Sales revenue × the estimated percentage

= $1,500,000 × 0.5%

= $7,500

The journal entry is as follows-

Bad debt expense A/c Dr  - $7,500

To Allowance for doubtful debts - $7,500

(Being bad debt expense is recorded)

Hence, the entry to record estimated bad debts will include an debit to bad debts expense in the amount of $7,500.

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