Question

Libby Company uses the percentage of credit sales method for calculating Bad Debt Expense. The company reported $226,500 in total sales during the year; $185,000 of which were on credit. Libby has experienced bad debt losses of 7% of credit sales in prior periods. What is the estimated amount of Bad Debt Expense for the year?

Answer 1

The estimated amount of Bad Debt Expense for the year is $12,950

Step-by-step explanation:

According to the given data we have the folloiwng:

reported sales during the year= $226,500

credit sales=$185,000

Libby has experienced bad debt losses of 7% of credit sales in prior periods

Therefore, in order to calculate the estimated amount of Bad Debt Expense for the year we would have to make the following calculation:

estimated amount of Bad Debt Expense=credit sales×bad debt losses percentage of credit sales in prior periods.

Hence, estimated amount of Bad Debt Expense= $185,000× 7%

estimated amount of Bad Debt Expense= $12,950

The estimated amount of Bad Debt Expense for the year is $12,950