Question

Harney Inc. uses the percentage of credit sales method of estimating doubtful accounts. The Allowance for Doubtful Accounts has an unadjusted credit balance of $2,700 and the company had $140,000 of net credit sales during the period. Harney has experienced bad debt losses of 4% of credit sales in prior periods. After making the adjusting entry for estimated bad debts, what is the ending balance in the Allowance for Doubtful Accounts account?

A) $8,300

B) $5,400

C) $2,900

D) $5,600

Answer

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