In preparing the financial statements for January,the accountant for Team Shirts has compiled the following information: accounts receivable are $5,000; the amount estimated to be uncollectible is 3% of sales for the month; sales for the month were $43,000; and the balance in the allowance for uncollectible accounts is a positive $1,000.Using the sales method,the amount of bad debts expense for January is ________.

Question

Quizplus · Accepted Answer

Using the sales method, we need to calculate the estimated bad debts by multiplying the sales for the month by the percentage estimated to be uncollectible:
$43,000 x 3% = $1,290
Since the balance in the allowance for uncollectible accounts is a positive $1,000, we only need to record the difference as bad debts expense:
$1,290 - $1,000 = $290
Therefore, the amount of bad debts expense for January is $290.

In Preparing the Financial Statements for January,the Accountant for Team