Manning Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $200,000 and credit sales are $1,000,000. Management estimates that 5% of accounts receivable will be uncollectible. What adjusting entry will Manning Company make if the Allowance for Doubtful Accounts has a credit balance of $2,000 before adjustment?
a. Bad Debts Expense 10,000 Allowance for Doubtful Accounts 10,000
b. Bad Debts Expense 8,000 Allowance for Doubtful Accounts 8,000
c. Bad Debts Expense 8,000 Accounts Receivable 8,000
d. Bad Debts Expense 10,000 Accounts Receivable 10,000
Ans: b. Bad Debts Expense 8,000 Allowance for Doubtful Accounts 8,000
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