Sabrina Inc. reported credit sales of $700,000 and cash sales of $100,000. The ending balance in accounts receivable was $1,500,000. Bad debt expense is estimated at 1% of credit sales. The allowance for doubtful accounts had a balance of $40,000 at the beginning of the year. What was the bad debt expense for the year?

Question

Quizplus · Accepted Answer

The bad debt expense is calculated as 1% of credit sales. Credit sales are $700,000, so 1% of $700,000 is $7,000. This is the bad debt expense for the year.