Question

Modern Designs is a new business. During its first year of​ operations, credit sales were $41,000 and collections of credit sales were $37,000. One​ account, $675​, was written off. Management uses the percent−of−sales method to account for bad debts expense and estimates 2​% of credit sales to be uncollectible. Bad debts expense for the first year of operations is​ ________.

Answer 1

Answer:

$145

Step-by-step explanation:

Calculation for the Bad debts expense for the first year of operations

First step is to find the 2% of credit sales to be uncollectible which is the amount of $41,000

2%×$41,000

=$820

Now let calculate for the Bad debts expense for the first year of operations

Bad debts expense =$820-$675 written off

Bad debts expense=$145

Therefore the Bad debts expense for the first year of operations will be $145