Superior Company has provided you with the following information before any year-end adjustments: Net credit sales are $120,000.
Historical percentage of credit losses is 2%.
Allowance for doubtful accounts has a credit balance of $300.
Accounts receivables ending balance is $47,000.
What is the estimated bad debt expense using the percentage of credit sales method?
A)$2,100.
B)$2,400.
C)$940.
D)$2,700.

Question

Quizplus · Accepted Answer

The estimated bad debt expense using the percentage of credit sales method is calculated by applying the historical percentage of credit losses to the net credit sales. Here, it's 2% of $120,000, which equals $2,400. The existing balance in the allowance for doubtful accounts is not considered in this calculation method.

Superior Company Has Provided You with the Following Information Before