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Helen [10]
3 years ago
6

Superior Company has provided you with the following information before any year-end adjustments: Net credit sales are $131,750.

Historical percentage of credit losses is 3%. Allowance for doubtful accounts has a credit balance of $400. Accounts receivables ending balance is $43,500. What is the estimated bad debt expense using the percentage of credit sales method
Business
1 answer:
aleksklad [387]3 years ago
5 0

Answer:

$3,553

Explanation:

Credit losses = Net credit sales × Historical percentage of credit losses

= $131,750 × 3%

= $3,953

Allowance for doubtful account has a credit balance of $400

The estimated bad debt expense can therefore be calculated as:

Bad debt expense = Credit losses - Allowance for doubtful accounts credit balance

= $3,953 - $400

= $3,553

Hence, the estimated bad debt expense using the percentage of credit sales method is $3,553

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