Question

Net credit sales for the month are 6,000,000 for Stacy Clothiers. Its accounts receivable balance is 300,000. The allowance is calculated as ________?

Answer 1

The allowance for Stacy Clothiers is calculated based on their net credit sales using a percentage method.

Step-by-step explanation:

The allowance for doubtful accounts is calculated based on the net credit sales of the company. In this case, Stacy Clothiers has net credit sales of $6,000,000. A common method to calculate the allowance for doubtful accounts is by using a percentage of net credit sales. This percentage is typically based on historical data or industry averages.

Let's assume that Stacy Clothiers uses a percentage of 5% to calculate the allowance. The allowance for doubtful accounts would then be $6,000,000 * 0.05 = $300,000.

Therefore, the allowance for Stacy Clothiers would be calculated as $300,000.