multiple choice question\nmurphys paw, inc. has credit sales of $100,000 for the month ended may 31. the…

multiple choice question\nmurphys paw, inc. has credit sales of $100,000 for the month ended may 31. the accounts receivable balance is $8,000. management estimates that 1% of its credit sales will be uncollectible. this adjusting entry includes a debit to \n\nbad debt expense and credit to accounts receivable for $1,000\n\nbad debt expense and credit to sales for $80\n\nbad debt expense and credit to sales for $1,000\n\nbad debt expense and credit to allowance for doubtful accounts for $80\n\nbad debt expense and credit to allowance for doubtful accounts for $1,000

multiple choice question\nmurphys paw, inc. has credit sales of $100,000 for the month ended may 31. the accounts receivable balance is $8,000. management estimates that 1% of its credit sales will be uncollectible. this adjusting entry includes a debit to \n\nbad debt expense and credit to accounts receivable for $1,000\n\nbad debt expense and credit to sales for $80\n\nbad debt expense and credit to sales for $1,000\n\nbad debt expense and credit to allowance for doubtful accounts for $80\n\nbad debt expense and credit to allowance for doubtful accounts for $1,000

Answer

Explanation:

Step1: Calculate bad - debt amount

The company has credit sales of $100,000 and estimates 1% of credit sales will be uncollectible. So the bad - debt amount is $100,000\times0.01=$1,000$.

Step2: Determine adjusting entry

When estimating uncollectible accounts using the percentage - of - sales method, we debit Bad Debt Expense and credit Allowance for Doubtful Accounts. The amount of the credit to Allowance for Doubtful Accounts is equal to the estimated uncollectible amount, which is $1,000 in this case.

Answer:

Bad Debt Expense and credit to Allowance for Doubtful Accounts for $1,000