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Darya [45]
3 years ago
11

Over the past five years, a company had average annual credit sales of $320,000 and this year had write-offs of $2,000. Credit s

ales in the current year are $300,000. The balance in the Allowance for Doubtful Accounts is a $500 credit. Using the percentage of credit sales method and an estimate of 1%, what amount should the company record as an estimate of bad debt expense
Business
1 answer:
Zielflug [23.3K]3 years ago
7 0

Answer:

$2,500

Explanation:

Bad debt Expense will be calculated using the percentage of debt loss. The expense will be calculated using the account receivable balance.

Estimated allowance for doubtful accounts = Credit Sales x percentage = $300,000 x 1% = $3,000

Current Balance = $500 credit

As Allowance for Doubtful Accounts already have credit balance of $500, we need to adjust the remainder to make the closing balance of Allowance for Doubtful Accounts $3,000 at the year end.

Adjustment Value = $3,000 - $500 = $2,500

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3 years ago
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3 years ago
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2 years ago
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