Benny Company had a beginning balance on January 1, 2019 in Accounts Receivable of $200,000 and...

Benny Company had a beginning balance on January 1, 2019 in Accounts Receivable of $200,000 and a beginning credit balance in the Allowance for Doubtful Accounts of $4,000. During 2019, Drew sold $1,000,000 of goods on credit and collected $800,000. If Drew estimates that 2% of their ending accounts receivable will eventually not be collected, the adjusting journal entry for the Bad Debt Expense will include a credit to Allowance for Doubtful Accounts of A. none of the listed choices B. $ 6,980 C. $ 8,000 D. $ 4,000 E. $ 16,000

Expert Solution

Notes: 1	CALCULATION OF BAD DEBT EXPENSES ON THE BASIS OF % OF ACCOUNT RECEIVABLE

	Beginning Balance of account receivable	$ 2,00,000
	Add: Sales of the year	$ 10,00,000
	Total	$ 12,00,000
	Less: Cash Collected	$ 8,00,000
	Ending Account Receivable	$ 4,00,000
	Estimated that 2% of $ 400,000 will be uncollectable	$ 8,000
	Less: Balance available in Allowance account	$ 4,000
	Net balance need to take adjusted as on 12/31/2018	$ 4,000

Solution:	Journal Entry of the above will be passed as below,


Date	Particulars	Debit	Credit

Oct, 01	Bad Debts Expenses account	$4,000
	Allowance for Doubtful Debts		$4,000



	Answer = Choice D = $ 4,000

ekkarill92 answered 2 years ago

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