Data for the year ended December 31 are presented below:

-Refer to AT&U Company. If the company estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense?

Question

Data for the year ended December 31 are presented below:
 
-Refer to AT&U Company. If the company estimates its bad debts at 1% of net credit sales, what amount will be reported as bad debt expense?

Quizplus · Accepted Answer

We need to calculate the bad debt expense. 
Net credit sales = Total sales - sales returns and allowances - cash sales
= $1,050,000 - $20,000 - $400,000
= $630,000
Bad debt expense = 1% of net credit sales 
= 1% * $630,000 
= $6,300 
Therefore, option C is the correct answer which is $24,500.

Data for the Year Ended December 31 Are Presented Below