Question

Flyer estimates bad debt expense assuming that 1% of credit sales have historically been uncollectible. How much is Flyer’s bad debt expense? Cash sales, $156,000 Credit sales, $456,000 Selling and administrative expenses, $116,000 Sales returns and allowances, $36,000 Gross profit, $496,000 Accounts receivable, $165,000 Sales discounts, $20,000 Allowance for doubtful accounts credit balance, $1,800

Answer 1

$4,560

Step-by-step explanation:

Credit Sales $456,000

Bad Debt Expense (456,000*1%) $4,560

It is assumed that bad debt expense of 1% is allowed on gross credit sales rather than net credit sales.