Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $258,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 6% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if the Allowance for Doubtful Accounts has a credit balance of $1,400 before adjustment? a. Bad Debt Expense 15,080 Allowance for Doubtful Accounts 15,080 b. Bad Debt Expense 13,080 Allowance for Doubtful Accounts 13,080 c. Bad Debt Expense 14,080 Allowance for Doubtful Accounts 14,080 d. Bad Debt Expense 13,580 Allowance for Doubtful Accounts 13,580
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.
Tanning Company analyzes its receivables to estimate
| Bad Debt Expense | 15,080 | |
| Allowance for Doubtful Accounts | 15,080 |
| Bad Debt Expense | 13,080 | |
| Allowance for Doubtful Accounts | 13,080 |
| Bad Debt Expense | 14,080 | |
| Allowance for Doubtful Accounts | 14,080 |
| Bad Debt Expense | 13,580 | |
| Allowance for Doubtful Accounts | 13,580 |
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