Brown Furniture Company decided to go after the younger market to create a newer customer base.In doing so,Ms.Brown offered a liberal credit policy and estimated she would have a 4% bad debt expense.In 2016,sales under this promotion were $600,000.Accordingly,she estimated a bad debt expense of $24,000.Her actual bad debt expenses were far less than expected,at about 2%.Her 2017 sales under the program are $800,000.How much bad debt expense should be reported on comparative income statements based on this information?

Question

Quizplus · Accepted Answer

The correct answer is A.In 2016, the estimated bad debt expense was $24,000, but the actual bad debt expense was 2% of sales, or $12,000. In 2017, the estimated bad debt expense is 4% of sales, or $32,000, but the actual bad debt expense is expected to be 2% of sales, or $16,000.

Brown Furniture Company Decided to Go After the Younger Market