A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable$375,000debitAllowance for uncollectible accounts 500debitNet Sales 800,000creditAll sales are made on credit. Based on past experience, the company estimates 0.6% of net credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?
A. Debit Bad Debts Expense $4,300; credit Allowance for Doubtful Accounts $4,300.
B. Debit Bad Debts Expense $5,300; credit Allowance for Doubtful Accounts $5,300.
C. Debit Bad Debts Expense $2,130; credit Allowance for Doubtful Accounts $2,130.
D. Debit Bad Debts Expense $2,630; credit Allowance for Doubtful Accounts $2,630.
E. Debit Bad Debts Expense $4,800; credit Allowance for Doubtful Accounts $4,800.
Answer: E
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