A&B Foods
Data for the year ended December 31, Year 1, are presented below.
$\begin{array}{lr}
\text { Sales (100\% on credit) } & \$ 2,100,000 \
\text { Sales returns } & 150,000 \
\text { Accounts receivable (December 31, Year 1) } & 420,000 \
\text { Allowance for doubtful accounts } & \
\quad \text { (before adjustment at December 31, Year 1) } & 25,000 \
\text { Estimated amount of uncollected accounts based on an aging analysis } & 75,000
\end{array}$
-Refer to the figure A&B Foods.If the company estimates its bad debts at 4% of net credit sales,what amount will be reported as bad debt expense for Year 1?

Question

A&B Foods
Data for the year ended December 31, Year 1, are presented below.
 $\begin{array}{lr}
\text { Sales (100\% on credit) } & \$ 2,100,000 \
\text { Sales returns } & 150,000 \
\text { Accounts receivable (December 31, Year 1) } & 420,000 \
\text { Allowance for doubtful accounts } & \
\quad \text { (before adjustment at December 31, Year 1) } & 25,000 \
\text { Estimated amount of uncollected accounts based on an aging analysis } & 75,000
\end{array}$
-Refer to the figure A&B Foods.If the company estimates its bad debts at 4% of net credit sales,what amount will be reported as bad debt expense for Year 1?

Quizplus · Accepted Answer

The bad debt expense is calculated as 4% of net credit sales. Net credit sales are calculated as sales minus sales returns, which is $2,100,000 - $150,000 = $1,950,000. Therefore, the bad debt expense is $1,950,000 * 4% = $78,000.

A&B Foods Data for the Year Ended December 31, Year

A&B Foods
Data for the Year Ended December 31, Year