The Following Selected Amounts Are Reported on the Year-End Unadjusted

Multiple Choice

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. All sales are made on credit.Based on past experience,the company estimates 1% of credit sales to be uncollectible.What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

A) Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
B) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
C) Debit Bad Debts Expense $22,250; credit Allowance for Doubtful Accounts $22,250.
D) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.
E) Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.