The Allowance for Doubtful Accounts account has a year-end credit balance, prior to adjustment, of $600. The bad debts are estimated at 4% of $650,000, the net credit sales. After the appropriate adjusting entry for bad debts, what will be the balance of the Allowance for Doubtful Accounts account?

$26600

Explanation:

The bad debits are estimated at 4% of $650000 which is = 0.04 * 650000

which is equal to  $26000. from the question above the the year end credit balance of the company prior to adjustment is $600 therefore after the adjustment made due to bad debts the balance of the allowance for doubtful accounts will be : estimated bad debts + credit balance = $26000 + $600 = $26600

Bad debts are debts been owed a company by its debtors or customers which might not be recovered and the little the percentage the better for the company.