Question

Rode Company estimates bad debt expense at 1% of credit sales. The company reported accounts receivable of $100,000 and a pre-adjustment credit balance in its allowance for uncollectible accounts account of $2,000 at the end of the current year. During the current year, Rode’s credit sales were $2,000,000. What is the amount of the company’s bad debt expense for the current year?

Answer 1

$20,000

Step-by-step explanation:

Calculation for the amount of the company’s bad debt expense for the current year

Using this formula

Bad debt expense = Credit Sales Amount × Estimated percentage uncollectible

Let plug in the formula

Bad debt expense = $2,000,000 × 1%

Bad debt expense =$20,000

Therefore the amount of the company’s bad debt expense for the current year will be $20,000