San Mateo Company had the following account balances at December 31, 2018, before recording bad debt expense for the year: $\begin{array}{lr}
\text {Accounts receivable }&\$1,400,000\
\text {Allowance for uncollectible accounts (credit balance)}&22,000\
\text {Credit sales for 2018 }&1,950,000\
\end{array}$
San Mateo is considering the following approaches for estimating bad debts for 2018: • Based on 3% of credit sales
• Based on 6% of year-end accounts receivable
What amount should San Mateo charge to bad debt expense at the end of 2018 under each method? $\begin{array}{lll}&\text { Percentage of credit sales }&\text { Percentage of accounts receivabl }\
\text { a. } & \$ 36,500 & \$ 62,000 \
\text { b. } & \$ 58,500 & \$ 62,000 \
\text { c. } & \$ 58,500 & \$ 84,000 \
\text { d. } & \$ 117,000 & \$ 95,000
\end{array}$

Question

San Mateo Company had the following account balances at December 31, 2018, before recording bad debt expense for the year: $\begin{array}{lr}
\text {Accounts receivable }&\$1,400,000\
\text {Allowance for uncollectible accounts (credit balance)}&22,000\
\text {Credit sales for 2018 }&1,950,000\
\end{array}$
 San Mateo is considering the following approaches for estimating bad debts for 2018: • Based on 3% of credit sales
• Based on 6% of year-end accounts receivable
What amount should San Mateo charge to bad debt expense at the end of 2018 under each method? $\begin{array}{lll}&\text { Percentage of credit sales }&\text { Percentage of accounts receivabl }\
\text { a. } & \$ 36,500 & \$ 62,000 \
\text { b. } & \$ 58,500 & \$ 62,000 \
\text { c. } & \$ 58,500 & \$ 84,000 \
\text { d. } & \$ 117,000 & \$ 95,000
\end{array}$

Quizplus · Accepted Answer

$1,950,000 × 3% = $58,500 = Percentage of credit sales (Income statement) approach.
$1,400,000 × 6% = $84,000 - 22,000 = $62,000 = Percentage of accounts receivable (Balance sheet) approach.

San Mateo Company Had the Following Account Balances at December