Question

Assume Simple Co. had credit sales of $260,000 and cost of goods sold of $160,000 for the period. Simple uses the percentage of credit sales method and estimates that 1 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 $350. What amount of Bad Debt Expense would the company record as an end-of-period adjustment

Answer 1

The correct answer is $2,600.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Credit sales = $260,000

Cost of goods sold = $160,000

So, we can calculate the Bad debt expense by using following formula:

Bad debt expense = Credit sales × 1%

By putting the value in the formula, we get

Bad debt expense = $260,000 × 1%

= $2,600