Assume Simple Co. had credit sales of $259,000 and cost of goods sold of $159,000 for the period. Simple uses the percentage of credit sales method and estimates that 2 percent of credit sales would result in uncollectible accounts. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $340.

What amount of Bad Debt Expense would the company record as an end-of-period adjustment?

Question

Assume Simple Co. had credit sales of $259,000 and cost of goods sold of $159,000 for the period. Simple uses the percentage of credit sales method and estimates that 2 percent of credit sales would result in uncollectible accounts. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $340.

What amount of Bad Debt Expense would the company record as an end-of-period adjustment?

anonymous · Answer

The required adjustment would be 5180(259000*2%)-340=4840

anonymous · Answer

The 4840 would also increase your liability account such as  accrued discounts and allowances account(that would be the offset to bad debt expense)