Jefferson uses the percent of sales method of estimating uncollectible expenses. Based on past history, 2% of credit sales are expected to be uncollectible. Sales for the current year are $5,550,000. Which of the following is correct regarding the entry to record estimated uncollectible receivables?
A) Cash will be debited.
B) Bad Debt Expense will be credited.
C) Allowance for Doubtful Accounts will be credited.
D) Accounts Receivable will be debited.

Question

Quizplus · Accepted Answer

The percent of sales method of estimating uncollectible expenses requires recording an adjusting entry to increase the Allowance for Doubtful Accounts. Therefore, the correct answer is C, Allowance for Doubtful Accounts will be credited. None of the other accounts listed are involved in this adjusting entry.

Jefferson Uses the Percent of Sales Method of Estimating Uncollectible