Tanning Company analyzes its recelvables to estimate bad debt expense. The accounts receivable balance is $370,000 and credit sales are $1,000,000. An aging of accounts receivable shows that approximately 7% 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 $2,600 before adjustment? a. Bad Debt Expense 22,300 Allowance for Doubtful Accounts 22,300 Ob. Bad Debt Expense 22,800 Allowance for Doubtful Accounts 22,800 Oc Bad Debt Expense 24,300 Allowance for Doubtful Accounts 24,300 Od. Bad Debt Expense 23,300 Allowance for Doubtful Accounts 23,300
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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