A Company Uses the Percent of Sales Method to Determine

Multiple Choice

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: All sales are made on credit. Based on past experience, the company estimates 0.6% 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 $2,130; credit Allowance for Doubtful Accounts $2,130.
B) Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630.
C) Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300.
D) Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800.
E) Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.