On December 31, 2015, the accounts receivable account and allowance for doubtful accounts of Beckman Corporation have the balances of $600,000 debit and $5,000 debit, respectively. Net sales for the year 2015 are $1,000,000. The company uses percentage of receivables method to account for bad debts and the percentage for estimated uncollectible is 5%. The amount of adjusting entry for bad debt expense that would be recorded on December 31.2015 is: a. S30,000 b. S35,000 c. S50,000 d. S29,750
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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