Question

Libre, Inc. has experienced bad debt losses of 5% of credit sales in prior periods At the end of the year, the balance of Accounts Receivable is $121,000 and the Allowance for Doubtful Accounts has an unadjusted credit balance of $1,550 Net credit sales during the year were $192,000. Using the percentage of credit sales method, what is the estimated Bad Debt Expense for the year? Multiple Choice $6,050 $9100 $9,600

Answer 1

debit Bad debt Expense = $9,600

so correct option is $9,600

Step-by-step explanation:

given data

bad debt losses = 5%

Accounts Receivable = $121,000

unadjusted credit balance = $1,550

Net credit sales = $192,000

to find out

estimated Bad Debt Expense for the year

solution

first we get here Bad debt expense by percentage of credit sales method that is

Bad debt expense = credit Sales × percentage of bad debt losses

Bad debt expense = $192,000 × 5%

Bad debt expense = $9,600

so here we can say $9,600 will be recorded as

debit Bad debt Expense = $9,600

and credit Allowance for doubtful debts = $9,600

so here revised balance in Allowance for doubtful debts is $9,600 + $1,550 = $11150

so correct option is $9,600