Question

Kelton Inc. reported net credit sales of $310,000 for the current year. The unadjusted credit balance in its Allowance for Doubtful Accounts is $525. The company has experienced bad debt losses of 2% of credit sales in prior periods. Using the percentage of credit sales method, what amount should the company record as an estimate of Bad Debt Expense?

Answer 1

Amount should the company record as an estimate of Bad Debt Expense  is $6,200

Explanation:

Net credit sales of Kelton Inc. for the current year = $310,000

The unadjusted credit balance in Allowance for Doubtful Accounts = $525.

Kelton Inc. bad debt losses of = 2% of credit sales in prior periods.

Estimate of Bad Debt Expense = Credit Sales * Bad debit %

• Estimate of Bad Debt Expense = ($310,000 * 2) / 100
• Estimate of Bad Debt Expense = $6,200

Amount should the company record as an estimate of Bad Debt Expense = $6200