The Percentage of Sales Method helps us calculate our Bad Debt Expense.

Concept #1: Net Accounts Receivable: Percentage of Sales Method

Practice: A company had credit sales totaling $2,000,000 this year. The company has a policy estimating 1.5% of credit sales to be uncollectible. The Allowance for Doubtful Accounts has a current debit balance of $2,000. What is the journal entry to record this year’s bad debt expense? What is the ending balance in the Allowance for Doubtful Accounts?