Question

The Chicken Union has experienced bad debt losses of 5% of credit sales in prior periods. At the end of the year, the balance of Accounts Receivable is $124,000 and the Allowance for Doubtful Accounts has an unadjusted credit balance of $1,700. Net credit sales during the year were $198,000. Using the percentage of credit sales method, what is the estimated Bad Debt Expense for the year

Answer 1

$9,900

Step-by-step explanation:

With regards to the above, the percentage of credit sales method estimates bad debt expense by multiplying historical percentage of bad debt losses by the current period's credit sales.

Bad debt expense = Net credit sales × Bad debt loss rate

Bad debt expense = $198,000 × 0.05

Bad debt expense = $9,900

Therefore, estimated bad debt expense for the year is $9,900