Question

A company has $90,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 4% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is an $800 credit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Answer 1

Answer:

The answer is $4400.

Step-by-step explanation:

A company has $90,000 in outstanding accounts receivable.

Experience suggests that 4% of outstanding receivables are un collectible.

So, its 4% becomes: $0.04\times90000=3600$ dollars

Now, the current balance in the allowance for doubtful accounts is an $800 credit.

Hence, the final answer is = $3600+800=4400$ dollars

The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for: $4400.