A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts:
All sales are made on credit.Based on past experience,the company estimates 0.6% of credit sales to be uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
A)$1,275
B)$1,775
C)$4,500
D)$4,800
E)$5,500

Question

A company uses the percent of sales method to determine its bad debts expense.At the end of the current year,the company's unadjusted trial balance reported the following selected amounts:
 All sales are made on credit.Based on past experience,the company estimates 0.6% of credit sales to be uncollectible.What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
A)$1,275 
B)$1,775 
C)$4,500 
D)$4,800 
E)$5,500

Quizplus · Accepted Answer

$800,000 * 0.006 = $4,800

A Company Uses the Percent of Sales Method to Determine