Asked by Rahaf Aldabain on May 07, 2024
Verified
Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? a. Bad Debt Expense 17,000\quad 17,00017,000
Allowance for Doubtful Accounts 17,000\quad 17,00017,000
b. Bad Debt Expense 19,500\quad 19,50019,500
Allowance for Doubtful Accounts 19,500\quad 19,50019,500
c. Bad Debt Expense ~~~~ 22,000
Allowance for Doubtful Accounts 22,000\quad 22,00022,000
d. Bad Debt Expense ~~~~~ 65,000
Allowance for Doubtful Accounts 65,000\quad 65,00065,000
Allowance for Doubtful Accounts
A contra-asset account used to estimate the portion of accounts receivable that may not be collectible.
Aging of Accounts Receivable
A report or method that categorizes a company's accounts receivable according to the length of time an invoice has been outstanding to evaluate the likelihood of collecting on those invoices.
Receivables Balance
The total amount owed to a business by its customers or clients for goods or services delivered on credit.
- Understand the allowance method for accounting for uncollectible accounts.
- Determine the necessary adjustments for allowance for doubtful accounts.
Verified Answer
Learning Objectives
- Understand the allowance method for accounting for uncollectible accounts.
- Determine the necessary adjustments for allowance for doubtful accounts.
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