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. $$\begin{array} { | l | r | l | } \hline \text { Accounts receivable } & \$ 435,000 & \text { Debit } \\\hline \text { Allowance for Doubtful Accounts } & 1,250 & \text { Debit } \\\hline \text { Net Sales } & 2,100,000 & \text { Credit } \\\hline\end{array}$$ 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 $22,250; credit Allowance for Doubtful Accounts $22,250.
B) Debit Bad Debts Expense $19,750; credit Allowance for Doubtful Accounts $19,750.
C) Debit Bad Debts Expense $21,000; credit Allowance for Doubtful Accounts $21,000.
D) Debit Bad Debts Expense $15,225; credit Allowance for Doubtful Accounts $15,225.
E) Debit Bad Debts Expense $7,350; credit Allowance for Doubtful Accounts $7,350.