The allowance for doubtful accounts has a current debit balance of $2,550. Bad-debt expense is estimated to be 3% of net credit sales. If net credit sales were $250,000, which of the following would be part of the adjusting entry for bad-debt expense?
A)Debit allowance for doubtful accounts for $7,500.
B)Credit allowance for doubtful accounts for $4,950.
C)Debit bad-debt expense for $7,500.
D)Debit bad-debt expense for $10,050.

Question

Quizplus · Accepted Answer

Bad-debt expense is estimated to be 3% of net credit sales. If net credit sales were $250,000, bad-debt expense would be $7,500 (0.03 x $250,000). The adjusting entry would be to debit bad-debt expense for $7,500 and credit allowance for doubtful accounts for $7,500.

The Allowance for Doubtful Accounts Has a Current Debit Balance