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Papa Bear Corporation's unadjusted trial balance includes the following balances (assume normal balances):Accounts Receivable $1,119,000Allowances for Doubtful Accounts $ 21,300Bad debts are estimated to be 6% of outstanding receivables. What amount of bad debts expense will the company record?a. $67,140b. $45,840c. $44,562d. $68,418

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Answer:

b. $45,840

Explanation:

Bad debts are estimated = 6% x $1,119,000 = $67,140

Bad debts are estimated based on outstanding receivables and Allowances for Doubtful Accounts before adjusting trial balance $21,300, so Bad debts expense the company will record:

$67,140 - $21,300 = $45,840

The entry will be:

Debit Bad debts expense: $45,840

Credit Allowances for Doubtful Accounts: $45,840

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