Question

Sami Co. has the following sales: cash sales BD68,000, credit sales BD740,500, Visa & Master card sales BD410,800. Sami estimated bad debts to be 1.5% of credit sales. The amount of the allowance for doubtful debts is​

Answer 1

The amount of the allowance for doubtful debts is BD11,107.50.

Step-by-step explanation:

Allowance for doubtful accounts can described as an estimate of the amount of accounts receivable which a business expects that it will not be collectible.

From the question, we have:

Credit sales = BD740,500

Estimated bad debts percentage = 1.5%

Therefore, allowance for doubtful debts can be calculated as follows:

Allowance for doubtful debts = Credit sales * Estimated bad debts percentage ............ (1)

Substituting the values into equation (1), we have:

Allowance for doubtful debts = BD740,500 * 1.5% = BD11,107.50

Therefore, the amount of the allowance for doubtful debts is BD11,107.50.