Question

Based on past history, Smart Touch Learning's bad debts expense is approximately 2% of its accounts receivable balance. Its accounts receivable balance at the end of the year was $50,000. Using the percent-of-receivables method, Smart Touch Learning's bad debts expense for the year is $1,000.

A. True
B. False

Answer 1

Smart Touch Learning's bad debts expense for the year is $1,000 using the percent-of-receivables method. The given statement is true. Option a

Step-by-step explanation:

The question asks if it is true or false that Smart Touch Learning's bad debts expense for the year is $1,000. Based on the given information, we can calculate the bad debts expense using the percent-of-receivables method. The bad debts expense is calculated by multiplying the accounts receivable balance by the estimated percentage of bad debts.

In this case, the accounts receivable balance is $50,000 and the estimated percentage of bad debts is 2%. Therefore, the bad debts expense is 2% of $50,000, which equals $1,000. So the correct answer is A. True.