Question

Momrow Inc. uses the percentage of credit sales method to estimate its bad debt expense and estimates that 5% of credit sales will result in uncollectible accounts. The company had $320,000 of net credit sales during the year, and its Allowance for Doubtful Accounts has an unadjusted credit balance of $6,300. After making the adjusting entry for to record bad debt expense, what is the ending balance in the Allowance for Doubtful Accounts account?

Multiple Choice

• $12,600.

• $9,700.

• $16,000.

• $22,300.

Answer 1

Correct Option D i.e. $22,300
Allowance for Doubtful Accounts account beg. Balance	6,300
Add: Bad debt expense credited to alowance account	16,000	(320000*5%)
Allowance for Doubtful Accounts account Ending balance	22,300