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Elenna [48]
3 years ago
8

M Company uses the percentage of sales method to account for its uncollectible accounts. On December 31, 2018, M has $1,800,000

in sales and 60% of these sales were in cash. M has a $2,000 credit balance in its allowance for doubtful account. Past experience suggested that 0.5% of credit sales are uncollectible. Requirements [You must show your work/steps of how you arrive at your answers] Question 1: What is the amount that M should report as its estimated bad debt expenses for year 2018
Business
1 answer:
Hitman42 [59]3 years ago
3 0

Answer:

See below

Explanation:

Estimated uncollectible based on past experience

= [($1,800,000 × 60%) × 0.5%]

= $1,080,000 × 0.5%

= $5,400

Credit balance in allowance for doubtful account = $2,000

Therefore, the total amount M should report as its estimated bad debts expense for the year 2018

= $5,400 - $2,000

= $3,400

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