Question

The following information is from the 2017 records of Armand Music​ Shop: Accounts​ receivable, December​ 31, 2017 ​$43,000 (debit) Allowance for Bad​ Debts, December​ 31, 2017 prior to adjustment ​1,500 (debit) Net credit sales for 2017 ​178,000 Accounts written off as uncollectible during 2017 ​18,000 Cash sales during 2017 ​25,000 Bad debts expense is estimated by the​ percent-of-sales method. Management estimates that​ 6% of net credit sales will be uncollectible. Calculate the amount of bad debts expense for 2017.

Answer 1

The bad debt expense amounts to $ 10,680

Step-by-step explanation:

The bad debt expenses for the year 2017 is computed as:

As the percent of sakes method is used for estimating the bad debt expense. Therefore, it is computed as:

Bad debt expense = Net Credit Sales × Estimate Percent

where

Net credit sales amounts to $178,000

Estimate percent is 6%

So, putting the values above:

Bad debt expense = $178,000 × 6%

Bad debt expense = $10,680

Therefore, the bad debt expense amounts to $10,680