Question

Assume simple co. had the credit sales of $ 241,000 and the cost of goods sold of $141,000 for the period. Simple uses the percentage of credit sales method and estimates that 2 percent of credit sales would result in uncollectible accounts. Before the end of period adjustment is made, the allowance for doubtful accounts has a credit balance of $160.

What amount of bad debt expense would the company record as an end of period adjustment?

Answer 1

$4,820

Step-by-step explanation:

Given the above information

Credit sales = $241,000

Cost of goods sold = $141,000

The bad debt expense can be computed using the below formulae

Bad debt expense = Credit sales × 2%

Bad debt expense = $241,000 × 2%

Bad debt expense = $4,820