Question

Saint John Industries uses the percentage of credit sales method to estimate Bad Debt Expense. The company reported net credit sales of $510,000 during the year. Saint John has experienced bad debt losses of 3% of credit sales in prior periods. At the beginning of the year, Saint John has a credit balance in its Allowance for Doubtful Accounts of $4,100. No write-offs or recoveries were recorded during the year. What amount of Bad Debt Expense should Saint John recognize for the year

Answer 1

$15,300

Step-by-step explanation:

When we determine bad debts as a percentage of credit sales, then bad debt expense to be recognized every year is computed below

= Total Credit Sales × Percentage of bad debts

= $510,000 × 3%

= $15,300

Here, the Journal entry is shown below:-

Bad Debt Expense Dr, $15,300

To Allowance for Doubtful Accounts $15,300