Nugyen recorded sales of $280 000 during the year. Of these, $180 000 were on credit. Bad debts in the past have averaged 1% of credit sales. Using the income statement method, the amount to provide for estimated bad debt expense for the year is:

Question

Quizplus · Accepted Answer

To calculate the estimated bad debt expense using the income statement method, we need to apply the % of credit sales that is expected to be uncollectible. In this case, the bad debt estimate is based on past experience and has averaged 1% of credit sales. Therefore, the estimated bad debt expense would be:
$180,000 (credit sales) x 1% (bad debt rate) = $1,800. 
Thus, the best choice is D.

Nugyen Recorded Sales of $280 000 During the Year