Question

Sunshine Inc. reported net credit sales of $360,000 for the current year. The unadjusted credit balance in its Allowance for Doubtful Accounts is $650. The company has experienced bad debt losses of 1% of credit sales in prior periods. Using the percentage of credit sales method, what amount should the company record as an estimate of Bad Debt Expense

Answer 1

Answer: $3,600

Step-by-step explanation:

Bad Debt expense using the percentage of sales method is the percentage of net sales that is usually lost to bad debts and that percentage in this case is 1%.

Bad debt expense will therefore be;

= Net credit sales * Bad debt percentage

= 360,000 * 1%

= $3,600