Question

Sully Corporation uses a percentage-of-credit sales method for accounting for bad debt expense. Sully estimates that 2% of sales will eventually become uncollectible. If Sully has $100,000 of credit sales during the year, the adjustment for estimated uncollectible accounts will require a

Answer 1

Explanation:

The adjusting entry is as follows

Bad debt expense A/c Dr  $2,000

  To Allowance for uncollected accounts A/c $2,000

(Being bad debt expense is recorded)

The computation of the bad debt expense is shown below:

= Credit sales × estimated percentage given

= $100,000 × 2%

= $2,000

Since the percentage of credit sales method is used so we multiplied the credit sales with the estimated given percentage so that the estimated uncollected amount could come