Company B estimates bad debt expense to be 2 of credit sales

Company B estimates bad debt expense to be 2% of credit sales, which were $610,000 for the year. If the allowance account has a debit balance of $900 before adjustment, the journal entry necessary to record bad debt expense is:

debit Allowance for Doubtful Accounts for $12,200; credit Bad Debt Expense for $12,200

debit Allowance for Doubtful Accounts for $11,300; credit Bad Debt Expense for $11,300

debit Bad Debt Expense for $12,200; credit Allowance for Doubtful Accounts for $12,200

debit Bad Debt Expense for $13,100; credit Allowance for Doubtful Accounts for $13,100

debit Bad Debt Expense for $11,300; credit Allowance for Doubtful Accounts for $11,300

debit Allowance for Doubtful Accounts for $13,100; credit Bad Debt Expense for $13,100

Solution

debit Bad Debt Expense for $12,200; credit Allowance for Doubtful Accounts for $12,200 , Bad debts expenses as per percentage of sales do not consider opening allowance account, bad debts expense is $12200 (2% * $610,000 ), the allowance account will have a credit balance of $11300 after adjustment