A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable $375,000 debit
Allowance for uncollectible accounts 500 debit
Net Sales 800,000 credit
All sales are made on credit. Based on past experience, the company estimates that 0.6% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?
A) $4,800
B) $5,500
C) $4,500
D) $1,275
E) $1,775

Question

Quizplus · Accepted Answer

The amount of bad debts expense is calculated as follows:Bad Debts Expense = Net Credit Sales * Estimated Uncollectible PercentageBad Debts Expense = $800,000 * 0.006Bad Debts Expense = $4,800

A Company Uses the Percent of Sales Method to Determine