Question

At the beginning of​ 2019, Patriots, Inc. has the following account​ balances: Accounts Receivable ​$45,000 (Debit) Allowance for Bad Debts ​$8,000 (Credit) Bad Debts Expense ​$0 During the​ year, credit sales amounted to​ $810,000. Cash collected on credit sales amounted to​ $770,000, and​ $18,000 has been written off. At the end of the​ year, the company adjusted for bad debts expense using the​ percent-of-sales method and applied a​ rate, based on past​ history, of​ 3.5%. The amount of bad debts expense for 2019 is​ ________.

A. $28,350
B. $18,350
C. $18,000
D. $56,875

Answer 1

Option (A) $28,350

Step-by-step explanation:

Data provided in the question:

Accounts Receivable = ​$45,000 (Debit)

Allowance for Bad Debts ​= $8,000 (Credit)

Bad Debts Expense = ​$0

During the​ year, credit sales =​ $810,000

Cash collected on credit sales =​ $770,000

Amount written off = $18,000

Percent of Bad debts expense = 3.5%

Therefore,

Bad debt expenses = credit sales × Percent of bad debts expense

= $810,000 × 3.5%

= $28,350

Hence,

Option (A) $28,350