Liberty Company estimates that its annual bad debts approximate 4% of credit sales. Liberty had the following balances at year-end prior to recording adjusting entries:

Credit Sales $160,000
Trade Receivables $30 ,000
Allowance for Doubtful Accounts $100 (debit balance)

-On Liberty's income statement for the year, what would bad debt expense amount to?
A) $5,200.
B) $6,300.
C) $6,400.
D) $6,500.

Question

Liberty Company estimates that its annual bad debts approximate 4% of credit sales. Liberty had the following balances at year-end prior to recording adjusting entries:
 
Credit Sales $160,000
Trade Receivables $30 ,000
Allowance for Doubtful Accounts $100 (debit balance)

-On Liberty's income statement for the year, what would bad debt expense amount to?
A) $5,200.
B) $6,300.
C) $6,400.
D) $6,500.

Quizplus · Accepted Answer

Calculation: $160,000 × 4% = $6,400.

Liberty Company Estimates That Its Annual Bad Debts Approximate 4