Question

At the end of the current year, accounts receivable has a balance of $760,000, allowance for doubtful accounts has a debit balance of $7,000, and sales for the year total $3,420,000. What is the estimated bad debt expense at 1.25% of sales?

Answer 1

The estimated bad debt expense is $35,750.

Step-by-step explanation:

To calculate the estimated bad debt expense, we need to find 1.25% of sales.

First, we calculate the bad debt allowance by multiplying sales by 1.25%:

Sales * 1.25% = $3,420,000 * 1.25% = $42,750

Next, we determine the allowance for doubtful accounts by subtracting the debit balance of $7,000:

$42,750 - $7,000 = $35,750

Therefore, the estimated bad debt expense is $35,750.