The current credit balance in allowance for doubtful accounts is $1,150. Management estimates that 2% of net credit sales of $100,000 will be uncollectible. Based on the foregoing data, what is the bad-debt expense balance on the income statement?
A)$2,000
B)$850
C)$3,150
D)$2,850

Question

Quizplus · Accepted Answer

The bad-debt expense is calculated based on the current period's credit sales. Management estimates 2% of $100,000 in credit sales will be uncollectible, which equals $2,000. This amount is the bad-debt expense for the period, regardless of the existing balance in the allowance for doubtful accounts.

The Current Credit Balance in Allowance for Doubtful Accounts Is