Question

Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2021, net credit sales totaled $4,700,000, and the estimated bad debt percentage is 1.70%. No previously written-off accounts receivable were reinstated during 2021. The allowance for uncollectible accounts has a credit balance of $44,000 at the beginning of 2021 and $41,000, after adjusting entries, at the end of 2021. Required: 1. What is bad debt expense for 2021 as a percent of net credit sales?

Answer 1

Bad debt expense for 2021 as a percent of net credit sales is $79,900

Step-by-step explanation:

The computation of the bad debt expense is shown below:

= Net credit sales × estimated bad debt percentage

= $4,700,000 × 1.70%

= $79,900

All other information which is given in the question are not related to the bad debt expense as it is an estimated bad debt percentage of the net credit sales Hence, we ignored it