The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts: Accounts receivable $ 443,000 Debit Allowance for Doubtful Accounts 1,330 Credit Net Sales 2,180,000 Credit All sales are made on credit. Based on past experience, the company estimates 4.0% of ending accounts receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense? O Debit Bad Debts Expense $18,720; credit Allowance for Doubtful Accounts $18,720. O Debit Bad Debts Expense $19,050; credit Allowance for Doubtful Accounts $19,050. O Debit Bad Debts Expense $17,720; credit Allowance for Doubtful Accounts $17,720. O Debit Bad Debts Expense $16,390; credit Allowance for Doubtful Accounts $16,390. O Debit Bad Debts Expense $8,720; credit Allowance for Doubtful Accounts $8,720.
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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