Question

Santana Rey, owner of Business Solutions, realizes the need to account for bad debts. Assuming total revenues of $48,000 and accounts receivable on March 31, 2022, is $22,067, what is the bad debts expense?

a. $48,000
b. $22,067
c. $25,933
d. Not enough information

Answer 1

Without additional information on the company's method of estimating bad debts, it's impossible to calculate the bad debts expense from available data.

Step-by-step explanation:

The question "Assuming total revenues of $48,000 and accounts receivable on March 31, 2022, is $22,067, what is the bad debts expense?" cannot be answered with the information provided. To calculate the bad debts expense, additional information on the company's method for estimating bad debts (such as a percentage of sales or accounts receivable) is necessary. Therefore, the correct answer is d. Not enough information.

Given that total revenues are $48,000 and accounts receivable on March 31, 2022, is $22,067, we need to calculate the bad debts %.

Bad debts % = Accounts receivable / Total revenues

Bad debts % = $22,067 / $48,000 = 0.4593 or 45.93%

Therefore, the bad debts expense in this case would be: Bad debts expense = $48,000 * 0.4593 = $22,079.44. Rounded to the nearest dollar, the bad debts expense would be $22,079.