Question

Creek Co. uses the percentage of credit sales method in determining its bad debt expense. The following information comes from the accounting records of Creek Co.: Cash sales $ 300,000 Credit sales 1,200,000 Total sales 1,500,000 Credit balance in the Allowance for Doubtful Accounts 7,500 Bad debt loss rate 3 % What is the estimate of bad debt expense?

Answer 1

Answer:

$28,500

Explanation:

Credit sales = $1,200,000

Bad debt account estimate = 1,200,000 *0.03 = 36,000

Amount already in allowance for doubtful account = 7,500

estimated bad debt expense = 36,000 - 7,500 = 28,500