Libre,Inc.has experienced bad debt losses of 4% of credit sales in prior periods.At the end of the year,the balance of Accounts Receivable is $100,000 and the Allowance for Doubtful Accounts has an unadjusted credit balance of $500.Net credit sales during the year were $150,000.Using the percentage of credit sales method,what is the estimated Bad Debt Expense for the year?

Question

Quizplus · Accepted Answer

The percentage of credit sales method estimates Bad Debt Expense by multiplying the historical percentage of bad debt losses by the current period's credit sales.
Bad Debt Expense = Net credit sales × Bad debt loss rate
= $150,000 × 0.04 = $6,000

Libre,IncHas Experienced Bad Debt Losses of 4% of Credit Sales