On December 31 of the current year,the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable,debit balance of $100,000; Allowance for Doubtful Accounts,credit balance of $600; credit sales of $420,000.What amount should be debited to Bad Debts Expense,assuming 1% of credit sales are estimated to be uncollectible?
A)$4,200.
B)$4,800.
C)$3,600.
D)$5,770.
E)$5,660.

Question

Quizplus · Accepted Answer

The amount to be debited to Bad Debts Expense is calculated as 1% of credit sales, which is 1% of $420,000 = $4,200. This method bases the bad debt expense on the total credit sales of the period.

On December 31 of the Current Year,the Unadjusted Trial Balance