Flyer Company has provided the following information prior to any year-end bad debt adjustment: • Cash sales,$150,000
• Credit sales,$450,000
• Selling and administrative expenses,$110,000
• Sales returns and allowances,$30,000
• Gross profit,$490,000
• Accounts receivable,$110,000
• Sales discounts,$14,000
• Allowance for doubtful accounts credit balance,$1,200
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Flyer estimates bad debt expense assuming that 1.5% of credit sales have historically been uncollectible.What is the balance in the allowance for doubtful accounts after bad debt expense is recorded?
A)$7,950.
B)$6,750.
C)$5,550.
D)$7,800.

Question

Quizplus · Accepted Answer

The bad debt expense is calculated as 1.5% of credit sales, which is 1.5% of $450,000 = $6,750. Since the allowance for doubtful accounts already has a credit balance of $1,200, the new balance after recording the bad debt expense will be $1,200 + $6,750 = $7,950.

Flyer Company Has Provided the Following Information Prior to Any