The current credit balance in allowance for doubtful accounts is $150. Management estimates that 2.5% of net credit sales of $105,000 will be uncollectible. Based on the foregoing data, what is the bad-debt expense balance on the income statement?
A)$2,775
B)$2,475
C)$2,650
D)$2,625

Question

Quizplus · Accepted Answer

The bad-debt expense is calculated as 2.5% of net credit sales, which is $105,000. Therefore, the bad-debt expense is 0.025 * $105,000 = $2,625. The current credit balance in the allowance for doubtful accounts does not affect the calculation of bad-debt expense for the income statement.

The Current Credit Balance in Allowance for Doubtful Accounts Is