Abbott Company uses the allowance method of accounting for uncollectible accounts.Abbott estimates that 3% of net credit sales will be uncollectible.On January 1,the Allowance for Doubtful Accounts had a credit balance of $2,400.During the year,Abbott wrote off accounts receivable totaling $1,800 and made credit sales of $100,000.There were no sales returns or sales discounts during the year.After the adjusting entry,the December 31,balance in the Bad Debt Expense will be
A)$1,200
B)$3,000
C)$3,600
D)$7,200

Question

Quizplus · Accepted Answer

Abbott estimates 3% of $100,000 in credit sales will be uncollectible, which is $3,000. The Allowance for Doubtful Accounts had a beginning balance of $2,400 and $1,800 was written off, leaving a balance of $600. To adjust to the estimated $3,000, an additional $2,400 is needed, making the Bad Debt Expense $3,000.

Abbott Company Uses the Allowance Method of Accounting for Uncollectible