At the end of a period before adjustment,Allowance for Doubtful Accounts has a debit balance of $500.Net credit sales for the period total $800,000.If bad debt expense is estimated at 1% of net credit sales,the amount of bad debt expense to be recorded in the adjusting entry is $8,500.

Question

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The bad debt expense should be 1% of $800,000, which is $8,000, not $8,500. The existing debit balance in the Allowance for Doubtful Accounts does not affect the calculation of the bad debt expense.

At the End of a Period Before Adjustment,Allowance for Doubtful