Final answer:
To calculate the bad debt estimation using the income statement method, multiply the total credit sales by the uncollectible percentage. Racing Adventures would estimate $22,008.88 as bad debt, but this figure does not match the provided options, indicating a possible error.
Step-by-step explanation:
The question relates to estimating bad debt using the income statement method in accounting. According to the income statement method, the bad debt estimation for the year is calculated based on the percentage of credit sales deemed uncollectible. To estimate the bad debt, we multiply the total credit sales by the uncollectible percentage. In this case, Racing Adventures recorded $323,660 in credit sales and the uncollectible percentage is 6.8%. The estimation for bad debt is therefore:
$323,660 (credit sales) * 0.068 (uncollectible percentage) = $22,008.88
However, none of the given options match this calculated figure, suggesting there may be an error in the question or the options provided. It is important to use the correct figures and calculations when estimating bad debt to ensure that the financial statements of the company are accurate.