Dorothy Company uses the percentage-of-receivables method for recording bad debt expense. The Accounts Receivable balance is $250,000 and credit sales are $1,000,000. Management estimates that 6% of accounts receivable will be uncollectible. What adjusting entry will Dorothy Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?
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.
Dorothy Company uses the percentage-of-receivables method for recording
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
