Bigg and Talle Corporation uses the percent-of-sales method to estimate uncollectibles. Net credit sales for the current year amount to $5,000,000, and management estimates 2% will be uncollectible. Allowance for Uncollectible Accounts prior to adjustment has a credit balance of $16,000. The amount of expense reported on the income statement will be:

Question

Quizplus · Accepted Answer

The expense reported on the income statement is calculated as 2% of net credit sales, which is $5,000,000 * 2% = $100,000. The existing balance in the Allowance for Uncollectible Accounts does not affect the expense reported.

Bigg and Talle Corporation Uses the Percent-Of-Sales Method to Estimate