Flyer Company has provided the following information prior to any year-end bad debt adjustment: • Cash sales,$150,000
• Credit sales,$450,000
• Selling and administrative expenses,$110,000
• Sales returns and allowances,$30,000
• Gross profit,$490,000
• Accounts receivable,$110,000
• Sales discounts,$14,000
• Allowance for doubtful accounts credit balance,$1,200
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Flyer prepares an aging of accounts receivable and the result shows that 5% of accounts receivable is estimated to be uncollectible.How much is bad debt expense?
A)$5,500.
B)$6,700.
C)$4,240.
D)$4,300.

Question

Quizplus · Accepted Answer

The bad debt expense is calculated based on the aging of accounts receivable, which estimates 5% of accounts receivable to be uncollectible. With accounts receivable at $110,000, 5% of this is $5,500 ($110,000 * 5%). However, since there's already a credit balance of $1,200 in the Allowance for Doubtful Accounts, the additional bad debt expense needed to adjust the allowance to the correct amount is $5,500 (desired balance) - $1,200 (existing credit balance) = $4,300.

Flyer Company Has Provided the Following Information Prior to Any