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Financial Accounting

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Moderate

Bad Debt Exp Income Statement Method

FINACT-YTPGFV

Jazz Company has a \$200 credit balance at 10/31/17 in the Allowance for Doubtful Accounts before month-end adjusting entries have been made. After analyzing the Accounts Receivable account, which has a balance of \$30,000 at year-end, it has been determined that two customers have account balances that will more than likely be uncollectable because they are more than 180 days past due.

Smith and Associates owes Jazz Company \$2,000 on an invoice dated 2/28/17, and Brown Corporation owes \$1,800 related to an invoice dated 1/20/17. Total sales for 2017 are \$250,000, and \$200,000 are credit sales. The company estimates bad debt expense to be 3% of credit sales.

How much bad debt expense needs to be recorded in an adjusting entry at month-end if Jazz Company uses the income statement method to estimate bad debts for the month?

A

\$5,800

B

\$6,200

C

\$6,000

D

\$7,500