Tanning company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is 390,000 in credit sales are 1.3 million. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will tanning company make if the allowance for doubtful accounts has a credit balance of 2500 before adjustment?
Tanning company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is 390,000 in credit sales are 1.3 million. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will tanning company make if the allowance for doubtful accounts has a credit balance of 2500 before adjustment?
Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 6Q: Earrings Depot records bad debt using the allowance, balance sheet method. They recorded $97,440 in...
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Tanning company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is 390,000 in credit sales are 1.3 million. An aging of accounts receivable shows that approximately 5% of the outstanding receivables will be uncollectible. What adjusting entry will tanning company make if the allowance for doubtful accounts has a credit balance of 2500 before adjustment?
Expert Solution
Step 1
Allowance for doubtful debts is considered as the contra asset item i.e used to decrease the value of the account receivable. It is based on estimation on the basis of past experience.
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