Answer:
$760
Explanation:
Account Receivable = $8,000
Total Credit sales = $38,000
As management estimates 2% of the total credit sales will be uncollectible the debt expense will be
Debt Expense = Credit Sales x 2%
Debt Expense = $38,000 x 2%
Debt Expense = $760
The Journal Entry will be as follow
DR. Bad debt Expense $760
CR. Account receivable $760
It is assumed that the expense is directly charged to income statement there is no adjustment to provision for doubtful debt account.
