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rose company uses the percentage of receivables method for recording bad debt expense. the accounts receivable...

rose company uses the percentage of receivables method for recording bad debt expense. the accounts receivable balance is $25,000 and credit sales ar $100,000. management estimates that 6% of accounts receivable will be uncollectible. what adjusting entry will rose company make if the allowance for doubtful accounts has a balance of $250 before adjustment?
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Answer #1

Answer:

Adjustry entry

Bad debts Dr. $ 5,750
To Allowance for doubful accounts $ 5,750

Explanation:

The sales balance = $ 100,000

Accounts receivable (uncollectable) = 6%

So, allowance for doubtful accounts = 100,000 * 6% = $ 6,000

Existing balance of allowance for doubtful accounts = $ 250

Therefore, allowance for doubtful accounts required = $ 6,000 (-) $ 250 = $ 5,750

In case of any doubt or clarification, feel free to come back via comments.

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