Tanning Company Analyzes Its Receivables to Estimate Bad Debt Expense

Multiple Choice

Tanning Company analyzes its receivables to estimate bad debt expense. The accounts receivable balance is $300,000 and credit sales are $1,000,000. 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 $2,000 before adjustment?

A) Bad Debt Expense 13,000 Allowance for Doubtful Accounts 13,000
B) Bad Debt Expense 15,000 Allowance for Doubtful Accounts 15,000
C) Bad Debt Expense 17,000 Allowance for Doubtful Accounts 17,000
D) Bad Debt Expense 20,000 Allowance for Doubtful Accounts 20,000