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Correcting entry

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J8) A company inappropriately used the direct writeoff method to book bad debts expense. Accounts written off and charged to expense were 150 in 2003, 250 in 2004 and 350 in 2005. Credit sales were 10,000 in 2003, 11,000 in 2004 and 12,000 in 2005. At Dec 2005, the company realizes it should have followed the allowance method and should have assumed that 3% of credit sales should be the bad debt expense provision in each year. Ignoring income taxes, what is the correcting entry at Dec 2005?

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Solution Summary

The solution explains the correcting entry to fix a direct writeoff mistake for bad debts.

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The total credit sales are (10,000+11,000+12,000)= 33,000. Bad debt expense is 3% of sales which comes to ...

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