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Question
Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $390,000 and credit sales are $1,300,000. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will Tanning Company make if Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?
a. Bad Debt Expense 17,000
Allowance for Doubtful Accounts 17,000
b. Bad Debt Expense 19,500
Allowance for Doubtful Accounts 19,500
c. Bad Debt Expense 22,000
Allowance for Doubtful Accounts 22,000
d. Bad Debt Expense 65,000
Allowance for Doubtful Accounts 65,000
Answer
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