The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts: Accounts receivable $ 446,000 Debit Allowance for Doubtful Accounts 1,360 Credit Net Sales 2,210,000 Credit All sales are made on credit. Based on past experience, the company estimates 3.0% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

The adjusting entry which is to be recorded is shown below:

Explanation:

The adjusting entry which is to be recorded is as:

Bad Debt Expense A/c Dr $14,740

         Allowance for Doubtful Accounts A/cCr $14,740

As the company records the bad debt expense at the end of the present year

Working Note:

As the company used the percent of receivables sales

Amount = Accounts receivables × Percentage of ending receivable

= $446,000 × 3.0%

= $13,380

Bad debt expense amount = Amount - Debit balance of allowance for doubtful accounts

= $13,380 + $1,360

= $14,740

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