Question

Abbott company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of credit sales will be uncollectible. On January 1, the allowance for doubtful accounts had a credit balance of $3,400. During the year, Abbott wrote-off accounts receivable totaling $2,400, and made credit sales of $118,000. After the adjusting entry, the December 31 balance in bad debt expense would be

A. $3540

B. $6940

C. $4540

D. $3400

Answer 1

		Opening Balance of Allowance for Doubtful Accounts	3400
		Less: Account Receivable Write off	2400
		Balance Left in Allowance for Doubtful Accounts	1000
	A	Estimated Uncollectiable	3%	of Cr Sales
	B	Credit Sales during the period	118000
	A*B	Estimated Uncollectiable on Credit Sales	3540
		Less :Balance Left in Allowance for Doubtful Accounts	1000
		Balance to be charged to Bad Debts Expense	2540
		Journals will be as follows:
		For Write off:
		Allowance for Doubtful Debts Account Dr.	2400
		To Bad Debt Expense		2400
		Bad Debt Expense Dr.	2400
		To Account Receivable Account		2400
		For Closing Balance:
		Bad Debt Expense Account Dr.	3540
		To Allowance for Doubtful Debts Account		3540
		So the Answer or Net Balance in Bad Debt Expense Account will be $3540
		A