Final answer:
To find the average percentage of credit sales resulting in bad debts, divide the total amount of bad debts by the total credit sales and multiply by 100 to get the percentage.
Step-by-step explanation:
To calculate the average percentage of credit sales that result in bad debts from historical experience, you can follow a simple formula. Typically, this involves dividing the total amount of credit sales that were eventually written off as bad debts by the total credit sales for the same period. Then, multiply the result by 100 to get a percentage.
For example, if a bank's total credit sales over a year amounted to $10 million, and it determined that $200,000 of those sales will likely be uncollectible based on past experience, you would calculate the bad debt percentage as follows: ($200,000 / $10,000,000) * 100 = 2%. This reflects the percentage of sales that is expected to become bad debts.