In 2011,Seven Seas sold $20,000 worth of merchandise on account.Its accountant estimated that $400 of that amount would be uncollectible.In 2011,Saki,a Japanese customer,purchased $500 of merchandise on account from Seven Seas.In 2012,Saki declared bankruptcy while still owing the $500.What is the amount of bad debts expense Seven Seas should report on December 31,2011?

Question

Quizplus · Accepted Answer

The estimated uncollectible amount of $400 should be recognized as bad debt expense in 2011, as it is a reasonable estimate of the amount that will not be collected from credit sales made during that year. The additional $500 owed by Saki became uncollectible in 2012, so it should not be included in the bad debt expense for 2011. Therefore, the answer is B, $400.

In 2011,Seven Seas Sold $20,000 Worth of Merchandise on Account