The following information is from the 2015 records of Armand Camera Shop: $$\begin{array} { | l | r | }
\hline \text { Accounts Receivable, December 31,2015 } & \$ 40,000 \text { (debit) } \
\hline \begin{array} { l }
\text { Allowance for Bad Debts, December 31,2015 } \
\text { prior to adjustment }
\end{array} & 1,500 \text { (debit) } \
\hline \text { Net credit sales for 2015 } & 175,000 \
\hline \text { Accounts written off as uncollectible during 2015 } & 15,000 \
\hline \text { Cash sales during 2015 } & 27,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the percent-of-sales method. The management estimates that 3% of net credit sales will be uncollectible. Calculate the amount of bad debts expense for 2015.

Question

The following information is from the 2015 records of Armand Camera Shop: $$\begin{array} { | l | r | } 
\hline \text { Accounts Receivable, December 31,2015 } & \$ 40,000 \text { (debit) } \
\hline \begin{array} { l } 
\text { Allowance for Bad Debts, December 31,2015 } \
\text { prior to adjustment }
\end{array} & 1,500 \text { (debit) } \
\hline \text { Net credit sales for 2015 } & 175,000 \
\hline \text { Accounts written off as uncollectible during 2015 } & 15,000 \
\hline \text { Cash sales during 2015 } & 27,000 \
\hline
\end{array}$$ Bad debts expense is estimated by the percent-of-sales method. The management estimates that 3% of net credit sales will be uncollectible. Calculate the amount of bad debts expense for 2015.

Quizplus · Accepted Answer

Bad debts expense is calculated as 3% of net credit sales: 0.03 * $175,000 = $5,250.

The Following Information Is from the 2015 Records of Armand